DESCRIPTIVE ANALYSIS OF THE FINANCING OF LOCAL SELF-GOVERNMENT UNITS WITH SPECIAL REFERENCE TO THE MUNICIPALITY OF STRUMICA
DESCRIPTIVE ANALYSIS OF THE FINANCING OF LOCAL SELF-GOVERNMENT UNITS WITH SPECIAL REFERENCE TO THE MUNICIPALITY OF STRUMICA

Summary/Abstract: The financing of local self-government units is a fundamental aspect of municipal governance, directly influencing the capacity of these entities to deliver essential public services and promote local development. This paper offers a comprehensive descriptive analysis of the financing mechanisms utilized by local self-government units, with a specific focus on the municipality of Strumica in North Macedonia. By examining the various sources of revenue and the allocation of expenditures, this study provides insights into the fiscal dynamics that shape the municipality's financial health and operational efficiency. Strumica, like many municipalities, relies on a mix of own revenues, intergovernmental transfers, borrowing, and external aid. Own revenues, primarily derived from local taxes and fees, are crucial for maintaining financial autonomy. However, the potential of these revenues is often limited by economic conditions and administrative challenges in tax collection. Intergovernmental transfers from the central government constitute a significant portion of Strumica's budget, underscoring the municipality's dependency on these funds to finance essential public services and infrastructure projects. While these transfers are vital, they also introduce challenges related to fiscal dependency and variability in funding. Borrowing is another critical component of Strumica’s financial strategy, primarily utilized for capital investments in infrastructure. The municipality's borrowing practices are regulated to ensure fiscal discipline and sustainability. However, the reliance on borrowing necessitates careful debt management to avoid fiscal stress. Additionally, Strumica benefits from international aid and donations, particularly from the European Union and other international organizations. These funds support various development projects, from environmental initiatives to cultural preservation, enhancing the municipality's capacity to meet its developmental goals. Expenditure management in Strumica is directed towards key sectors such as public services, education, infrastructure, and social welfare. Efficient allocation and control of expenditures are essential to meet the diverse needs of residents within budgetary constraints. The municipality faces several fiscal challenges, including limited revenue generation capacity, high dependence on central government transfers, and increasing expenditure pressures. Addressing these challenges requires comprehensive financial management strategies that enhance local revenue generation, ensure reliable intergovernmental transfers, and maintain prudent debt levels. The case of Strumica highlights the complexities and challenges inherent in the financing of local self-government units. Effective financial management is crucial for ensuring fiscal stability and promoting sustainable local development. This analysis underscores the importance of a balanced approach to municipal financing, emphasizing the need for enhancing local revenue bases, securing stable intergovernmental support, and managing expenditures efficiently. The insights drawn from Strumica’s experience provide valuable lessons for other municipalities facing similar fiscal challenges, contributing to broader discussions on improving the financial sustainability and autonomy of local self-government units.

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