Excellencies, Ladies and Gentlemen,

Empowered local and regional governments are crucial for Agenda 2030. They are responsible for delivering 65% of SDG targets and 70% of climate solutions.

They deliver essential services to ordinary people. Education, healthcare to housing, transport, water, sanitation, and clean energy.

They are trusted and they are capable. However, they are also under-acknowledged and under-funded.

Their proximity to citizens uniquely positions them to build public trust. People generally trust their local government more than central government.

Local and regional governments often need to cope with unfunded or underfunded mandates. Some major cities in developed countries spend up to 1,200 times more per capita than capital cities in least developed countries.

Local governments are heavily reliant on fiscal transfers from the national government. This is 50% of their revenues. Yet, unpredictability and earmarking limit their effectiveness. Access to concessional finance is also restricted. Decentralization of revenue raising is often limited.

Ladies and gentlemen, if we want to advance the SDGs, local government financing is crucial.

The Fourth International Conference on Financing for Development offers us an opportunity. Together we can advocate for solutions that support local and regional governments.

Today, I would like to highlight three pathways for enhancing local government finance.

First, we need to set up local-level financing strategies to support local and regional governments.

These strategies help us better understand the financial landscape. They bring together various sources of financing – public, private, domestic and international.

Building on the success and learning of over 85 Integrated National Financing Frameworks, UNDP has already supported 10 countries to develop similar frameworks at the local level. They provide clear pathways for local governments to access and manage resources, both public and private capital.

UNDP supported Pakistan’s Punjab Province to become the first subnational government to launch an integrated financing strategy in February 2024, focusing on mobilizing private capital and advancing innovative financing mechanisms to boost investment in climate, housing, and health.

In Ghana, the INFF approach at the local level has led to an average 17.5% increase in revenue generation.

Second, we must strengthen sub-national financing systems and expand funding sources.

The focus should be, when appropriate and in accordance to national law, to support local governments to generate their own revenue and secure reliable fiscal transfers.

Enforcement and digitalization of payments can increase collected charges. National legislation can also incentivize and support local revenue expansion.

Another incentive is to have predictable and fiscal transfers that are in line with local priorities and national laws.

In North Macedonia, to help municipalities manage the financial strain caused by multiple crises, UNDP supported the introduction of two new funding mechanisms: performance-based and equalization funds. This was achieved by increasing the VAT share by 1.5% in favor of local governments.

In Liberia, UNDP is supporting national property tax collection for revenue-sharing with local governments through use of GIS technology and a new digital appraisal system developed to automate property valuation.

We must also diversify local funding sources. Public and multilateral finance, private investment, and blended finance are available. But many local governments, especially in least developed countries, struggle with access.

Innovative financing mechanisms, such as Green Bonds, Catastrophe Bonds, carbon credits and public-private partnerships (PPPs), can attract both public and private investments. These mechanisms need to be scaled to address the finance gap.

In Cabo Verde, UNDP supported the issuance of Green, Social, Sustainability and Sustainability-linked bonds in 2021 and 2022, raising USD 16 million fund upgrades to blue economy infrastructure. This initiative enabled a non-profit agency to provide loans for sustainable entrepreneurship.

Third, we need to support transparent, accountable and participatory management of local public finances and assets.

There is the question of trust in the role of institutions. Citizens need to trust their local governments to manage their resources efficiently, with transparency and value for money. In absence of this trust, local taxation can hardly work.

With fiscal decentralization, we can build more resilient, sustainable communities.

Local governments need to improve budget planning, resource utilization, and data systems. They must also develop investable projects that address priorities.

In Malawi, UNDP supports local government structures in planning and allocating resources for development initiatives. Ensuring there is coordination with the national level, UNDP has also supported the work of the National Local Financing Committee to maximise local investments.

Participatory budgeting, citizen engagement and oversight ensure transparency and accountability. Many local governments are advancing on building transparent administrations through open local government strategies.

In Bangladesh, UNDP supports open and participatory local expenditure management. This includes local participatory budgeting approaches and open budget sessions at the Union Parishad level.

Most local governments across the world at least partially own and/or manage portfolios of physical and infrastructure assets, like land, natural resources, buildings. Supporting local governments in managing their assets is essential for advancing sustainable development.

In Bosnia and Herzegovina, UNDP supported local governments to establish a public asset management system, while also enhancing revenue and expenditure management, internal control systems, and advancing public procurement practices.

Excellencies, Ladies and Gentlemen,

There is so much potential at the local level. Local governments are the backbone of sustainable and inclusive societies – and a critical enabler for the whole of the 2030 Agenda.

Yet, development cooperation often bypasses them, missing an opportunity to increase the impact of international aid.

We should advocate for this to change. Supporting local governments more directly, in coordination with national frameworks, would amplify development achievements for the people we serve.

Thank you.