Intergovernmental Transfers for Environmental Infrastructure : Lessons from Armenia, the Russian Federation and Ukraine. Environmental Finance

This report draws on three detailed case studies in Eastern Europe, the Caucases and Central Asia (EECCA), and on the experience of OECD countries to provide guidance on how transfers from central budgets to local authorities could be designed to finance environmental infrastructures in transition economies. Ideally, the costs of water supply and sanitation should be covered by user charges. However, the high investment costs and associated affordability constraints mean that governments have an essential role to play in financing water services in EECCA and other regions. The report investiga. Read more... TABLE OF CONTENTS Acronyms Executive Summary Chapter 1. Main Findings from Case Studies The magnitude of intergovernmental transfers An analytical framework Recent trends in transfer mechanisms in EECCA Intergovernmental transfers to finance water infrastructurein EECCA Chapter 2. Intergovernmental Transfers forEnvironmental Expenditure in Armenia Legislative and regulatory framework governingintergovernmental transfers The system of intergovernmental transfers Controlling the use of earmarked transfers The structure of local budget expenditure Intergovernmental borrowing proceduresState support to the WSS sector at the regional/local level Institutional organisation of WSS Financial instruments The efficiency of intergovernmental transfer mechanismsto finance WSS services Annex 2.A1. The Legal Basis Governing Budgetary Relationships and Intergovernmental Financial Transfers and Lending in Armenia Annex 2.A2. The Legal Basis Governing the WSS Services Sector in Armenia Annex 2.A3. Investment Projects with Financial Institutions in Armenia Chapter 3. Intergovernmental Transfers forEnvironmental Expenditure in the Russian FederationLegislative and regulatory framework governingintergovernmental transfers The system of intergovernmental transfers Federal Financial Support Fund for Federation Subjects (FFSF) Compensation Fund (CF) Social Expenditure Co-Finance Fund (SECF) Regional Finance Reform Fund (RFRF) Regional Development Fund (RDF) Other grants and subventions Transfers made as part of mutual settlements Road maintenance subventions and grants Regional development initiatives Controlling the use of earmarked transfersThe structure of local budget revenues The structure of local budget expenditure Intergovernmental borrowing procedures State support to the WSS sector at the regional/local level Chapter 4. Intergovernmental Transfers forEnvironmental Expenditure in Ukraine Legislative and regulatory framework governingintergovernmental transfers The system of intergovernmental transfers Equalization grants Additional grants Subventions for the purpose of implementation of state socialprotection programmes Subventions for implementations of investment projectsOther subventions Analysis of local budget revenue structure Controlling the use of earmarked transfers The structure of local budget expenditure Intergovernmental borrowing procedures State support to the WSS sector at the regional/local level Institutional organisation of WSS Financial instruments The efficiency of intergovernmental transfer mechanisms tofinance WSS services Annex A. Institutional Devolution of Water in EECCA Earmarked and non-earmarked grants Mandatory and discretionary grants This report draws on three detailed case studies from Armenia, the Russian Federation and Turkey and on the experience of OECD countries to provide guidance on how transfers from central budgets to local authorities could be designed to finance environmental infrastructures in transition economies. The report also investigates mechanisms for transferring financial resources for water services from higher to lower levels of government