2008年-世界发展银行全球_Romania_Municipal_Finance_Policy_Note_59页_4mb

Romania Municipal Finance Policy Note Summary

Core Content

This policy note provides an analysis of Romania's municipal finance system and the challenges it faces in aligning with EU standards. It highlights the need for structural and fiscal reforms to improve the efficiency of local government and enhance the capacity of municipalities to access funding for essential services, particularly in the context of EU accession.

Main Points

1. Local Government Organization and Finance

• Role of Municipalities: Municipalities are crucial in providing local infrastructure services, including water, wastewater, and solid waste management, which are key under the EU environmental acquis.
• Fiscal Framework: The fiscal system is governed by several laws, including the Law on Local Public Finance (LLPF) and the Romanian Tax Code. Local governments rely heavily on transfers from the central government, which has led to uncertainty and over-dependence.
• Decentralization Efforts: The 2006 public administration reform attempted to clarify responsibilities and roles across different tiers of government. However, ambiguities and overlaps persist, particularly in areas like socio-medical assistance and social services.
• Challenges: Jurisdictional fragmentation and the lack of clear functional definitions have weakened accountability and efficiency. The reform process has been slow, with some policies still on hold.

2. Local Utilities

• Water Sector: The water sector is expected to bear the highest costs for compliance with EU environmental standards, requiring €9.7 billion in investment between 2005 and the end of the compliance period.
• Funding Sources: While EU funds will provide significant support, substantial domestic counterpart funding is needed. Tariff increases could be a source, but they may disproportionately affect the poor.
• Subsidies and Support: Targeted subsidies and alternative funding mechanisms such as development fees and the Municipal Repair and Development Fund (MRD) are recommended to support the poor while raising revenue.

3. Sub-national Debt Market

• Current Situation: The local government debt market has grown rapidly, with domestic currency loans increasing from RON 3.6 million in 2001 to RON 1,399 million in 2006.
• Legal and Regulatory Issues: The current system of local borrowing requires ex ante government authorization, which may signal government guarantee and encourage excessive risk-taking by lenders.
• Reform Proposals:
  • Phasing out government ex ante controls and replacing them with market mechanisms such as credit ratings.
  • Clarifying the legal framework for municipal financial crises and insolvency.
  • Adjusting the National Bank of Romania's (NBR) reserve requirements to reflect local credit ratings.
  • Developing a coherent strategy to improve access to credit markets for local governments, based on their risk profiles.

Key Information

Organizational Structure

• Romania is a unitary state with a constitutional framework promoting local autonomy and decentralization.
• Local governments include 3,127 units (104 municipalities, 207 towns, 2,816 communes) and 42 county governments.
• Prefects, appointed by the central government, have significant oversight powers, including the ability to suspend local decisions.

Fiscal System

• Revenue Sources: Local governments derive revenue from:
  • Earmarked transfers (36% of total): mainly for teacher salaries.
  • Local own taxes and fees (17%): including property taxes, hotel taxes, and various local fees.
  • Shared taxes and fees (27%): based on the place of work of taxpayers.
  • Equalization transfers (16%): aimed at balancing fiscal capacity across regions.
• Transfer System: The system is criticized for lack of transparency and predictability, and for allowing excessive influence by central authorities.

Legal and Regulatory Framework

• LLPF (Law on Local Public Finance): Requires the Ministry of Economy and Finance (MEF) to authorize local borrowing.
• Debt Management: The Law on Local Borrowing Authorization Commission (LBAC) regulates debt management and budgeting.
• Bankruptcy and Risk Fund: The legal framework for local government bankruptcy and a risk fund for local governments need clarification and improvement.

Recommendations

• Clarify Responsibilities: Define exclusive, shared, and delegated functions more clearly to reduce overlaps and ambiguities.
• Improve Transparency: Enhance the predictability and transparency of the transfer system.
• Strengthen Local Autonomy: Reduce the central government's involvement in local borrowing and debt management.
• Enhance Financial Mechanisms: Use credit ratings and market mechanisms to manage local debt.
• Support Local Utilities: Implement targeted subsidies and alternative funding sources to support poor populations and raise necessary funds.
• Strengthen Legal Frameworks: Clarify the legal basis for municipal financial recovery and insolvency procedures.
• Improve Access to Credit: Develop a strategy for improving access to credit markets based on the risk profiles of local governments.

Conclusion

Romania's municipal finance system requires comprehensive reforms to enhance efficiency, transparency, and local autonomy. These reforms should focus on clarifying responsibilities, improving the transfer system, and strengthening the legal and financial frameworks for local government operations. The development of a robust sub-national debt market and the implementation of targeted financial support mechanisms are essential for sustainable local service delivery and compliance with EU standards.