Fiscal Decentralization and Alternative Financial Sources for the Local Self-Government in Republic of North Macedonia - Overview

Local governance in developing countries demonstrates many problems related to financial sources and good governance of their finances. Local Self-Government (LSG) units in the Republic of North Macedonia are very small which results in a lack of capabilities to raise enough funds to offer delegated services. The local government in the Republic of North Macedonia centralizes almost all public finance. Local budgets depend heavily on state transfers and donations from the central budget. The lack of funds remained a crucial problem even though there were some attempts for the decentralization process. Practically, governments in many of the local governments in North Macedonia could not secure their resources. In this way, they could come with specific charges, but all taxes are decided by the central government. The practice showed that local governments before borrowing needs to be approved by the Ministry of Finance.

The Republic of North Macedonia as a potential candidate to join the European Union should make several changes regarding the legislation during the process of accession to benefit from being a small candidate country. The main aim of this paper is to investigate alternative financial sources such are Municipal Bonds, Partnership Sukuk securities, and PPP. Unfortunately, many financial alternatives have not been able to be implemented due to failures in reforms and good financial governance. But they remain an open opportunity for developing a local government in the future.