FINANCE

📝 Our assessment

Despite their critical role in achieving the Sustainable Development Goals (SDGs), local and regional governments continue to face systemic barriers to finance, including limited fiscal autonomy, unpredictable intergovernmental transfers, and restricted access to capital markets. Without proper financial mechanisms, local authorities struggle to provide essential services, build resilient infrastructure, and foster local economic development.

Key challenges include:

• Insufficient Fiscal Decentralization: Many local governments lack the autonomy to generate sufficient revenue, relying heavily on national transfers, which are often unpredictable and inadequate.

• Underfunded Public Investments: The lack of access to sustainable financing for infrastructure, climate resilience, and social services exacerbates inequalities and slows progress toward the SDGs.

• Limited Access to International and Private Capital: Only 1.3% of Official Development Assistance (ODA) is allocated directly to cities and regions, despite their role as primary service providers.

• Regulatory and Institutional Barriers: Outdated legal frameworks and restrictive borrowing regulations prevent local governments from securing the funds necessary for long-term development.

• Digital and Financial Innovation Gaps: The slow adoption of financial technology and innovative instruments limits the efficiency of local resource mobilization.

• A reformed global financial system must acknowledge the role of local governments as key development actors and ensure their access to diversified financial resources to achieve resilient, inclusive, and sustainable communities.

🤝 Our commitment

Local and regional governments commit to leading the transformation of local finance systems by strengthening governance frameworks, advocating for fiscal decentralization, and fostering innovation in financial management.

• Strengthening Local Fiscal Autonomy: Our constituency advocates for predictable, transparent, and needs-based intergovernmental transfers to ensure stable financing for local development and promotes local revenue generation through improved tax collection systems, land-value capture mechanisms, and participatory budgeting processes. Our commitment is also to expand municipal borrowing capabilities and access to credit by developing robust debt management frameworks and enhancing creditworthiness.

• Innovative Financing for Sustainable Development: We are committed to developing and scaling up financial instruments such as municipal bonds, green bonds, and blended finance solutions to mobilize private investment in local projects, as well as strengthen local public-private partnerships (PPPs) to finance critical infrastructure, housing, and social services sustainably. We are committed to promote digital transformation in public finance, leveraging financial technology (FinTech) to enhance transparency, efficiency, and local revenue collection.

• Ensuring Equitable and Sustainable Investment: We are devoted to establishing funds dedicated to urban resilience, climate adaptation, and social equity, ensuring that financial resources reach vulnerable populations and underserved communities. We are further committed to foster inclusive governance in financial decision-making, integrating participatory finance models to reflect the needs of all residents and align financial policies with the principles of environmental sustainability, ensuring investments support climate action, biodiversity, and the circular economy.

• Advancing Multilevel and Global Financial Reform: The global financial architecture needs to be revised to provide direct access to international financing for cities and regions. We will continue to strengthen partnerships with Multilateral Development Banks (MDBs) to create more accessible and adaptable financing mechanisms for local projects and advocate for local governments’ formal inclusion in global financial governance, ensuring their voices shape international funding priorities and decision-making processes.

📢 Our call

To unlock the full potential of local governments in achieving sustainable development, we call upon national governments, international financial institutions, and global partners to take decisive action:

• Institutionalize Fiscal Decentralization: We call to recognize local and regional governments as essential actors in public finance and integrate them into national and international financial decision-making processes and to ensure transparent and equitable distribution of financial resources, empowering local governments to respond effectively to community needs.

• Enhance Local Access to International and Climate Finance: We call to reform MDBs and international climate funds to provide direct financing channels for cities and regions and expand funding mechanisms such as subnational development banks, local climate resilience funds, and city investment facilities.

• Strengthen Local Financial Management and Innovation: We call to invest in capacity-building programs for local government officials to enhance financial planning, risk management, and innovative financing and develop financial regulatory frameworks that support municipal bond markets and enable creditworthy cities to access capital markets, as well as support digital finance initiatives that streamline local taxation, enhance revenue collection, and improve public sector transparency.

• Foster Partnerships for Sustainable Financing: We call to establish stronger collaboration between local governments, the private sector, and financial institutions to co-design inclusive and sustainable investment models and encourage philanthropic and impact investment initiatives that prioritize local development and social equity.

• Reshape the Global Financial Architecture: The role of local and regional governments in the United Nations and international financial institutions’ decision-making processes needs to be reshaped and we will continue to call for advocacy for increased ODA allocation to local governments to ensure more effective, localized development financing.