• Improve the level, quality and aim of inter-governmental fiscal transfers. Aligning local development plans with the SDGs and the devolution of competences related to the SDGs to local governments must not lead to a wider disparity between local expenditures and revenues within countries. A fairer distribution of domestic resources among different levels of government has become a strategic need to achieve the SDGs. Financial transfers to sub-national governments, for example, should be proportional to new transferred competences, predictable, transparent and regular, and include equalization mechanisms to reduce inequalities between territories. • Facilitate LRGs’ access to long-term finance. LRGs can become key levers of investment in basic services and resilient infrastructures. In developed countries, for example, where about 30% of total national budget is devolved to local and regional governments, LRGs are nonetheless account for over 50% of public investment – even though in low-income countries, where LRGs only receive 8% of total national budget, this figure drops to 7% (or even less, as it is the case in Uganda, with 5%, or Azerbaijan, with 3%°).86 In accordance with the AAAA, LRGs should be granted access, whenever possible, to credit and financial markets available for responsible borrowing. National governments should ensure appropriate financing options and mechanisms for investment by LRGs (e.g., municipal development banks and funds, as with Findeter in Colombia and BNDES in Brazil, credit guarantees, bond banks, credit pooling, etc.) and allow local governments to access innovative finance (public-private partnerships, urban funds) and rating mechanisms wherever markets are mature enough. • Localize development assistance. It is difficult to estimate the amount of Official Development Aid (ODA) that eventually reaches LRGs. Whenever mentioned in VNRs and Main Messages (20 reports out of 63 total documents), ODA flows are not explicitly linked to local tiers of government. It is essential to channel international savings towards the local level. International financial institutions and development banks can lead the way in this regard, particularly in cities of middle- and low-income countries, to reduce risks, support blended finance for urban infrastructure, and increase the creditworthiness of local governments. Development banks can support the implementation of a wider set of financial tools, such as green funds and other climate finance mechanisms, and solutions to lend money to sub-national governments directly or through Financial Intermediary Bodies. Finally, decentralized and city-to-city cooperation mechanisms are improving the technical capacities of municipal counterparts (see Section 5.2.1 above). Even though LRGs will be ultimately responsible for the implementation of many of the SDGs, an analysis of the means of implementation currently available to them shows substantial difficulties in understanding how, and to what extent, national governments will be able and willing to support the localization process. What actors and institutions will be able to put this process into practice, and how their capacities can be upgraded accordingly, remains unclear. In conclusion, if ambitious reforms of sub-national finances do not take place and if public and private actors do not design new mechanisms to channel funds towards the local level, financing localization will remain one of the greatest stumbling blocks in the implementation of the SDGs.
86 OECD and UCLG (2016) Subnational Governments around the World – Structure and Finance.
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