Montenegro improved and strengthened its municipal financing by adopting the new Law on Local Self-Government Financing.
The legal solution responds to unfavorable financial situation of underdeveloped municipalities, with the objective of reducing regional disparities. The support shall be provided in two ways: i.) by direct financial support from the Equalisation Fund and/ or ii.) by assisting the municipalities in meeting the pre-financing requirements of the EU funded projects.
The law introduces the Equalisation Fund as one of the key financial sources for underdeveloped municipalities and sets a method for financial equalisation for eligible municipalities in Montenegro. The system is supported by a software, which assists the Ministry of Finance in monitoring financial situation of Montenegrin municipalities, calculating and distributing allocations for eligible local governments, as well as keeping records on the distribution and expenditures of the fund.
The law also stipulates the mechanism for pre-financing donor-supported projects via establishment of the Revolving Fund. The Fund allows for borrowing for pre-financing of the implementation of the EU funded project.
The preparation of the law and the software delivery (including the manual) was financially supported by the Ministry of Finance of the Slovak Republic and implemented by the UNDP and the Ministry of Finance of Montenegro within the ongoing project “Strengthening Transparent and Accountable Public Finance Management in Montenegro”.
The brochure containing the law and all by-laws can be find here.