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The UCLG Support Paper is the background paper to the UCLG Policy Paper on Local Finance. The document first sets the context - the ongoing urban explosion is not yet met by appropriate investments in local infrastructure- and provides an overview of the current financing options and their limits: intergovernmental transfers and local taxes, public private partnership, infrastructure development through national and/or local public utilities, land and asset management, local public borrowing, funding through development banks and official development aid.

The Paper emphasized the need to reform both demand and supply side of financing to boost local infrastructure investments. On the demand side, as shown by historical and empirical evidence, fiscal decentralization frameworks should be enhanced to ensure local government’s financial autonomy and to generate swift and significant investment in public infrastructure. On the supply side, given the current constraints put on local government’s access to finance for infrastructure, there is an urgent need for change and for an improved intermediation at the national level. In particular, Municipal Development Funds performance need to be reviewed and reformed to provide small and medium size local governments with adequate funding for their urgent local infrastructure.

United Cities and Local Governments