Local financial autonomy as a prerequisite for improving the provision of public services and goods: the case of the Republic of Moldova

Abstract

Local autonomy, which is a central characteristic of local public administration, has been increasingly valued over the past decades. At the same time, the autonomy of local public administration (LPA) in the Republic of Moldova, including financial autonomy, is limited. The purpose of this paper is to formulate arguments in favor of the need for fiscal decentralization for the Republic of Moldova, to assess local public finances through the prism of fiscal autonomy and to formulate prospects for rationalizing local public finances. The general conclusion stated by the study is that the measures that are meant to improve the financial autonomy of LPAs cannot be initiated and implemented in an isolated way, without a consistent strategic vision. Moreover, these measures cannot avoid the need to reform the local public administration and rational administrative-territorial structure of the Republic of Moldova. Market mechanisms, namely competition and failure, which help to differentiate successful local public administrations from less successful ones, are not yet sufficiently developed in this sector of activity in the Republic of Moldova. In these conditions, the author proposes to use as a criterion for determining the effectiveness of local public administrations in the Republic of Moldova the ratio between local budget revenues, excluding transfers and deductions from public revenues, and expenditures related to the provision of public services of general purpose. The methodology used in the preparation of the paper includes the following research tools: monographic research, comparative analysis, retrospective statistical analysis, simple regression. The information base of the study is the statistical data provided by the National Bureau of Statistics, Ministry of Finance, National Bank of Moldova, Eurostat databases, etc. DOI: https://doi.org/10.30525/2256-0742/2022-8-5-25-35; JEL: H40, H60, H70