BAKU, Azerbaijan, April 6. Georgia needs to invest in urban areas, while simultaneously conducting financial decentralization of the regions and investing in social sectors to stimulate economic growth of the country, Trend reports via Asian Development Outlook 2022 from Asian Development Bank (ADB).
“Georgia maintains highly centralized public finances and intergovernmental fiscal arrangements despite subscribing to the European Charter of Local Self-Government, which states that tax and spending decisions should be made at the lowest practical level of government,” the report said.
According to ADB, fiscal decentralization will rationalize fiscal policy by empowering municipalities, promoting business growth, and improving the services sector. This will lead to local governments providing a broad range of infrastructure and services, and supporting social spending.
“Strengthening sub-national public finances will thus enable the more efficient and equitable provision of services, including the complex services critical for large population centers, water supply, and sanitation systems in secondary cities and towns, health care, education, and social protection,” ADB said.
As ADB explains, to fund these services local authorities will have to mobilize local revenue consistent with their revenue bases and supplemented by transfers from the central government and prudent borrowing.
The success of fiscal decentralization will depend on developing financial management capacity in local governments and training local officials in policy development and implementation skills, such as health and education budgeting and social service delivery, ADB concluded.
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