From 13th – 16th July 2015, the Third International Conference on Financing for Development (FfD) took place in Addis Ababa, Ethiopia.The conference resulted in the Addis Ababa Action Agenda that shall contribute to the financing and implementation of the post-2015 development agenda. In this document, the important role of the subnational and local level has been taken into account and is emphasised in in article 34: It is acknowledged that local governments need to be supported in mobilising revenues at the local level and that international cooperation must be scaled up for strengthening the capacities of municipalities and local authorities.
At the conference, the French Ministry of Foreign Affairs and International Development and UCLG organised a side event on “A New Financial Architecture for Localising FfD: A Critical Dimension to the Implementation of the Post-2015 Development Agenda”. The German Federal Ministry for Economic Cooperation and Development (BMZ) was represented by Stephan Ohme, Head of Unit, and contributed with an introductory speech to the side event. Stephan Ohme emphasised the need to empower local governments with sufficient competences, financial resources and capacities for local revenue mobilisation and to provide them with access to long-term development financing mechanisms.
During the discussion, it became clear that besides access to intergovernmental fiscal transfers and long-term development financing mechanisms, the strengthening of local governments’ capacities in tax collection for domestic resource mobilisation is crucial for an enhanced role of the subnational level in financing development. Therefore, innovative financing mechanisms must be established such as municipal development banks, credit pools or municipal bonds. Further issues discussed at the side event captured challenges such as the delivery of public services to informal urban settlements, the provision of resources to local governments for tackling climate change and the challenge of financing migration to urban areas.
A UCLG position paper on the role of local governments in the FfD process can be accessed here.