ISBN Number: 9264025030
Publication Date: 4 September 2006
Pages: 104

Intergovernmental Transfers for Environmental Infrastructure

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 investigates mechanisms for transferring financial resources for water services from higher to lower levels of government.  It looks at three countries with different institutional settings: Armenia, where responsibilities for the water supply and sanitation sector are maintained at the national level; the Russian Federation, a most interesting case of fiscal federalism; and Ukraine, which illustrates a variety of situations.

The experience of OECD countries has provided valuable guidance to benchmark the paths followed by the three countries under review.