Local Government Finance is Development Finance

Welcome to one of two blog posts that will be issued this week about recent global meetings. This post is about the conference on Local Fiscal Space and the recovery from COVID 19 held on November 17th.

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During 2020 the coronavirus pandemic has rocked the world’s economy causing pain, tragedy and hardship at many levels and effecting seismic changes on how most people live and work. The primacy of local government as an essential institution in mobilizing an effective response and recovery to the pandemic has been demonstrated. The virus has shown that the social and economic response requires a localized but joined up action across different departments and agencies.

Economically, the pandemic has created the sharpest and swiftest drop in global economic activity ever recorded. This contraction has reduced revenues for households, governments (central and local) and for private sector enterprises. Looking ahead to 2021, whether or not there is a swift vaccine and things return to “normal” or whether the pandemic continues for some time, some things are already clear.

Firstly, there have been winners and losers. Online platform providers, remote conferencing software providers, streaming services, delivery services and other businesses that do not require face to face customer interaction have clearly benefited from the pandemic. The “street sector”, which is a major contributor to fiscal revenue and constitutes a social safety net that connects the urban and rural economies (in many developing countries), has been a loser from the pandemic – the consequences of this loss will become apparent in 2021. This sector includes transportation, street sellers, markets, shops and stores and light processing and value addition such as mechanics, tailors, and ironware welders.

Secondly, the geographical scope of value chains has shrunk and many governments and policy makers have been reminded of how far the “just in time” economic model has spread. Attention is now being paid to the local de-industrialization of the last 20 years and governments are seeking to rebuild a domestic capacity to produce basic food and consumer produce within their own national economies. Examples include garments and basic pharmaceuticals. There is surprise that many countries, including developing countries, no longer have the capacity to domestically manufacture soap, for example.

Finally, fiscal space has contracted significantly. In 2021 governments will have less money to spend at time when there will be greater demands on their services. This may have political consequences and there is a risk that citizens will lose faith in government’s ability to serve them leading to further loss of trust and privatization of these services with consequences for those less able to pay.

Experiences so far have shown that especially four factors have impacted the local government fiscal space – 1) Loss of own source revenues due to COVID-19, 2) Non-conducive intergovernmental fiscal transfer system and/or insufficient adjustments of this, 3) Loss of local economic development and finally 4 ) Increase in local government costs due to the impact of COVID-19.

In this context, UNCDF started the Rebuilding Local Fiscal Space Initiative in close collaboration with various partners. Its overall objective is to provide tools and recommendations on the improvement of the local fiscal space in light of the COVID-19 challenges through a case-by-case review and analysis of the core factors impacting this in a range of selected municipalities. The focus of the review will be the four factors mentioned above (1, 2, 3 and 4), which contribute to this loss in the fiscal space and review of possible measures which can rebuild local fiscal space and accelerate national economic recovery and rebuild trust in public institutions, which should be both central government’s and local government’s responsibility.

This initiative will include two main phases – Phase 1) Understanding the four factors that contribute to the loss of local fiscal space, and Phase 2) Designing and testing the three measures to accelerate recovery and rebuild trust. Currently six cities have participated in the initial study including Kumasi (Ghana), Chandpur (Bangladesh), Gulu Municipality (Uganda), Chefchaouen (Morocco), Chiapas (Mexico), and Telita (Moldova).

Objective

The UNCDF Rebuilding Local Fiscal Space Conference will bring together mayors and local government officials of the participating cities and other interested cities, central government representatives and high-level participants from development partners, with the objective to:

• Present the findings of the initial study in phase 1 of the initiative;
• Discuss and explore the measures to accelerate economic and fiscal recovery in phase 2 of the initiative;
• Raise awareness of the imperative of rebuilding local fiscal space.

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Opening Remarks

Presentation of Initial Study Findings :

Panel Discussion

Closing Remarks:

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8:00am – 8:15am (New York time)[1]	Opening
	Opening Remarks Ms. Maimunah Mohd Sharif, Executive Director, UN-Habitat Dr. Rathin Roy, Managing Director (Research and Policy), Overseas Development Institute (ODI) Mr. David Jackson, Director of Local Development Finance, UNCDF
8:15am – 9:20am	Main Session
	Presentation of Initial Study Findings : Ms. Gundula Löffler, Research Fellow, ODI Mr. Jesper Steffensen, Senior Partner, Dege Consult   Panel Discussion Honorable Mayor Osei Assibey Antwi, Mayor of Kumasi, Ghana Honorable Mayor Advocate Jillur Rahman Jewel, Mayor of Chandpur Municipality, Chandpur, Bangladesh Honorable Mayor George Labeja, Mayor of Gulu Municipality, Uganda Honorable Governor Rutilio Escandón, Governor of Chiapas, Mexico Honorable Mayor Rodica Russu, Mayor of Telita, Moldova Honorable Mayor Mohamed Sefiani, Mayor of Chefchaouen, Morocco   Q&A   Moderator: Mr. Jaffer Machano, Municipal Investment Finance Programme Manager, UNCDF
9:20am – 9:30am	Closing
	Closing Remarks: Ms. Emilia Saiz, Secretary General, United Cities and Local Governments (UCLG) Mr. David Jackson, Director of Local Development Finance, UNCDF
9:30am	End of event