“It is now time to set up a new dialogue. Time to plan for more accountability mechanisms for budgeting and spending; build new compacts and improve budget management at all levels.”
Maimunah Mohd Sharif,
Under Secretary General of the United Nations and Executive Director of UN-Habitat
“As a global community we need to think how to support local governments to create their own revenue systems, as well as how they access financing mechanisms. We should think of a recovery fund that enables all levels of governments to respond to the challenges we are facing.”
Mpho Parks Tau,
Deputy Minister of Cooperative Governance and Traditional Affairs of South Africa
“We are seeing who are the essential workers but also the essential institutions. Health ministries are of course of the utmost importance, but local governments are integral to the recovery.”
David Jackson,
Director, Local Development Finance, United Nations Capital Development Fund
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Re-live the Live Learning
Experience about Local Finance

A group of peoples' hands coming together as a team


Municipal finance matters for the sustainability of local government provision of goods, infrastructure and services. Prior to the health crisis, cities and regions had already been facing several financial shortcomings and had been calling for the reshaping of a new financial ecosystem. The goal would be to achieve adequate funding, more fiscal autonomy and predictable intergovernmental fiscal transfers to support sustainable development projects at the local level. Efforts had also been carried out towards attracting both public and private resources for local capital investment projects.

While the lack of sufficient municipal funding is a global issue, local government expenditure varies widely between low- and high-income countries. For instance, in 2016, the average public expenditure by local and regional authorities in Africa was around 285$ Purchasing Power Parity (PPP) per capita, compared with an average of 5.890$ PPP per capita in OECD countries. Less than a quarter of African local governments’ expenditure is devoted to capital investment, compared to around 50% in OECD countries.

The COVID-19 outbreak has placed local and regional governments under additional financial pressure, as they are having to ensure the provision and financing of basic public services while incurring extraordinary expenditure on prevention and containment measures. This pressure is likely to persist and even worsen, at least in the short-mid-term. Simulations based on data from UCLG Africa’s Local Finance Observatory show that African local governments, on average, are likely to lose 30-65% of their resources, while the American National League of Cities, for instance, estimates a revenue loss for US cities of US $360 billion between 2020 and 2022.


Globally, on average, local government expenditure represents 8.6% of GDP


and about 24% of total public expenditure.


65% of the SDGs need local and regional governments’ involvement to be achieved.


Local governments constantly face the challenge of making very difficult choices, trying to address a variety of urgent needs – guaranteeing basic goods and services; promoting inclusive policies; establishing environmentally sustainable processes – all with finite resources. This challenge is compounded by the fact that local governments usually have little self-sufficiency and are heavily dependent on transfers from national governments, in addition to having limited access to capital markets, especially in low-income countries in Africa and Asia where the bulk of urban growth is taking place and the unmet need for infrastructure and services is massive. The COVID-19 crisis is forcing local governments to do even more with less. Local revenues are largely being impacted by emergency measures entailing deferred property tax and utility fee collection, combined with a decline in economic activity and closed-down revenue-generating infrastructure (parking lots, sports facilities, etc.). Besides urgent health measures, local governments are required to invest more in social protection measures, local economic development and local service provision to support those most affected by the crisis, including informal workers.

Learn more about the challenges being faced by cities and regions:


In order to achieve municipal financial sustainability, especially in times of crisis, increased support to local and regional governments will be needed in at least three critical focal areas: 

Rebuild local governments’ fiscal space: This includes granting local governments greater flexibility to (i) collect taxes and set tax rates and tax bases and (ii) identify innovative sources of revenues (including through renewed partnership with the private sector), with a view to increasing their fiscal autonomy.

Rethink the nature of transfers: This requires securing stable and predictable transfers from national governments, to be used at the discretion of local governments to (i) finance their operating expenditure and (ii) support local economic development in strategic sectors.

Help local governments to access capital markets: This entails increasing access to long-term domestic and external finance by (i) developing subnational development banks and mechanisms for risk transfer and pooling (ii) scaling up pilot experiences in blended finance (International Municipal Investment Fund) and pool financing (Africa Territorial Agency).

As an immediate response to the COVID-19 crisis, local governments are calling for the mobilization of additional funds to partially offset exceptional expenses – be it through intergovernmental fiscal transfers, international aid, local solidarity or emergency funds.


Johannesburg is working to provide financial packages directed to local businesses most affected by the COVID-19 crisis

Mexico City is setting up a programme called “Adopt an SME” for bigger firms to provide direct financial support to smaller ones

The regional government of Antioquia allowed municipalities to defer their debt repayment for at least 2 months


Johannesburg is working to provide financial packages directed to local businesses most affected by the COVID-19 crisis.

Mexico City is setting up a programme called “Adopt an SME” for bigger firms to provide direct financial support to smaller ones.

The regional government of Antioquia allowed municipalities to defer their debt repayment for at least 2 months.

Learn more about other responses and initiatives in terms of Local Finance:

the Presentations

Key Takeaways

  1. Cities need greater agency in and control over the fiscal chain in order to be able to design local fiscal responses adapted to their context so that they are better equipped to react in case of crises or emergencies.
  2. Cities need to provide a diverse set of support measures that are able to address the needs of large, medium and small businesses. Special attention must be put towards engaging vulnerable actors, such as women.
  3. Financing solutions must be established through a multi-stakeholder and multilevel process, providing a whole-of-government and whole-of-society response to the outbreak.
  4. Emergency mutual support mechanisms must be promoted, allowing greater social and financial solidarity among local governments through city-to-city cooperation at global, regional and national levels.
  5. Financial support packages should be aligned with the rebuilding and rethinking of local finances, to secure sustainable finances for the provision of basic public services.
  6. Local governments should maintain a continued and enhanced policy dialogue with national governments to call for local financial autonomy and predictable, transparent and commensurate fiscal transfers.
  7. An international relief and recovery fund should be set up to unlock local governments’ access to funds in support of local service provision.

the Press Release

The Outbreak

The COVID-19 outbreak is making cities rethink their local economic structure and how to make it more resilient. Globalisation and financialisation are making many big cities vulnerable to the decision of international companies that have no stake at the local social and economic levels of development. Cities like Mexico City are trying to promote the social and solidarity economy and foster stable, long-lasting sources of revenue that are more engaged with the local social fabric. Looking beyond the crisis also led Kumasi to open an escrow account and invest 5 to 8% of the income generated into government bonds to finance urban public infrastructure and help prepare for future crises.
Three people on ladders refurbishing a house.

Back Better

The UCLG Decalogue

“Adopting financial support mechanisms that allow local and regional governments to continue to work at the frontline for the communities during the crisis and in the post COVID-19 recovery phase.”


For further information on the topic of Local Finance and its impact on cities and regions, please refer to the related resources included below.


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