Final Report: Municipal Finance Strengthening Initiative Project in Ukraine

Agency for International Development, aimed to improve the municipal finance system in Ukraine. The project focused on improving the legislative and regulatory framework, promoting budget reforms, and enhancing the capacity of local governments to manage their finances. One of the key areas of focus was the improvement of intergovernmental budget relations. MFSI conducted an analysis of the formula for intergovernmental transfers and developed proposals for its improvement. The proposals were submitted to the Ministry of Finance, the Verkhovna Rada Budget Committee, and other stakeholders. The analysis took into account best international practices regarding equalization transfers and distribution formulas. MFSI experts also reviewed the process of assigning central budget capital transfers to local budgets for infrastructure development and recommended improvements to ensure transparency, consistency, and sufficiency of funds allocated. The proposals were submitted to the National Advisory Board and the Ministry of Finance, and were taken into account in their work. The project also assisted the Ministry of Finance and the Secretariat of the Verkhovna Rada Committee on Budget in finalizing the new version of the Budget Code. Proposals made by MFSI were included in the changes to the Budget Code, which were approved by the Verkhovna Rada of Ukraine on July 8, 2010. The changes ensured improvements to the efficiency of the distribution of subventions for the execution of investment projects between administrative and territorial units. Furthermore, MFSI promoted further budget reforms and the use of Performance Program Budgeting (PPB) methodology at the central and local levels. Five Financial and Economic Forums and a Conference on Improving the Efficiency of Budget Process were organized and conducted. The forums brought together representatives from different branches of government, the public, and international expert communities to discuss topical issues in municipal finance. The project also focused on strengthening the financial capacity of local governments to implement infrastructure projects, particularly energy-saving projects. The Fifth Financial and Economic Forum, held on November 27, 2009, hosted an international conference with participation from the M.E.S.A.10 Slovak Center for Economic and Social Analysis. The event was attended by over 60 representatives from different branches of government and the public. The Municipal Finance Strengthening Initiative project made significant contributions to improving the municipal finance system in Ukraine. The project's recommendations and proposals were incorporated into the Budget Code, and the project's forums and conferences brought together key stakeholders to discuss topical issues in municipal finance. The project's focus on improving intergovernmental budget relations, promoting budget reforms, and enhancing the capacity of local governments to manage their finances helped to strengthen the financial capacity of local governments and improve their ability to implement infrastructure projects.