Municipal Finance and Planning: 2020 Urban Learning Brief for Mission Staff

The world is increasingly turning to cities for solutions to pressing development challenges, like poverty, unemployment, access to basic services, and even climate change. These expectations effectively increase cities’ responsibilities. But this increase in responsibility is often not accompanied by the financial resources to meet them, even in countries that have implemented decentralization reforms. While cities naturally rely on fiscal transfers from the national government, which can be unreliable due to global economic trends as well as domestic political economy issues.

Consequently, cities around the world struggle to invest in critical infrastructure and deliver services to accommodate their fast-growing populations.

Municipal governments and other subnational entities must improve their revenue generation and financial management in orderto address urban challenges of the 21st century. Without adequate

resources, cities risk becoming centers of poverty, inequality, and environmental degradation—as opposed to centers of economic opportunity and social change.

There is an emerging opportunity to tap into cities’ potential to leverage capital to finance infrastructure projects and basic services. Improvements in municipal finance capacity encompasses

taxation, application of innovative finance tools, improving municipal debt capacity and leverage of private investment, among others.

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