Impact of fiscal decentralization on local economic development - Economicus

by, Fatlum Nurja

Abstract

Many reforms have been undertaken in local governance after the collapse of the totalitarian, centrist and bureaucratic regimes in Central and Eastern Europe. Albania has demonstrated that decentralization is a major development tool. More than two decades of decentralization activities have revealed that the decentralization process has brought about changes in the operation of institutions and delivery of services, even though this change has taken place gradually. Fiscal decentralization is one of the three dimensions that characterize the decentralization process. Local finance issues are an everyday topic in countries in transition and should be addressed by means of an approach that favors consolidation of local autonomy. Local governments in Albania have lacked, and continue to lack, the fiscal capacity to deliver on the promise of decentralization to improve public services and to promote and nurture local economic development. Decentralization can promote economic development and improve citizens’ welfare and living standards when service delivery and the quality of the decisions over how
public resources are deployed are improved, but local governments remain hampered by inadequate transfers from the central government and from restraints imposed on various revenue-generating options. However, inadequate financial instruments, especially those of intergovernmental transfers, have affected regional disparities. In this paper, through comparative analysis, analyzing a part of the Region (Qark) of Lezha’s LGUs, economic development indicators, will approve the need for reform of these LGUs’ financial instruments in order to narrow the gap of regional disparities in Albania.