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By Ghada A. Shaqour*
Administratively, Jordan’s intergovernmental system is divided into three tiers - central, provincial (governorate) and local (municipal) levels. At the local level, 100 municipalities exist today and are governed by elected municipal councils. They were assigned over 39 different functional responsibilities, but many of these have been assumed over time by other central line ministries or agencies. The range of their responsibilities is now limited to solid waste management, street lighting, storm water drainage, public markets and others. Meanwhile, public system in the country is highly centralized and service delivery is always conditioned by the availability of limited resources which are mainly channeled for financing operating expenditure. Municipalities are largely dependent on central fiscal transfers (shared fuel tax) which represent around 50% of their revenues. Own-source revenue mobilization is still weak because of in-efficient tax and fees enforcement and collection due to limited resources and weak local capacities.
At present, the only source for financing capital expenditure, in addition to central fiscal transfers, is borrowing from the Cities and Villages Development Bank (CVDB) which is the official lending agency and intermediary for fiscal transfers and grant administration in the municipal sector. CVDB plays a critical role in ensuring that municipalities are adequately financed for service provision. Municipal financial performance is however still largely unsustainable. Nevertheless, recent achievements have been registered with the adoption in March 2013 of a new formula for intergovernmental transfers which takes into account equality and fairness of distribution and is also a great step for enhancing municipal financial performance. Furthermore, CVDB has gone through a thorough analysis (completed in early December 2014) which came up with a restructuring strategy that will result in a more viable and financially healthy institution.
These achievements are largely attributed to the World Bank's funded project (co-financed with the French Development Agency- AFD), the Regional and Local Development Project (RLDP). This Program was the Bank's first operation to systematically address municipal development and the intergovernmental fiscal system in Jordan. Launched in 2006, RLDP closed in December 2014 and targeted all Jordanian municipalities (excluding the Greater Amman Municipality). The Bank, through the Emergency Services and Social Resilience Project (ESSRP), continues to support a number of Jordanian municipalities to provide more sustainable services, which have been hugely constrained by the influxes of the Syrian refugees particularly in the northern region of the country.
In light of this continuous support by the World Bank to the Jordanian municipal sector and given the key role of municipal finance in the development of local governance, the planned Municipal Creditworthiness Academy represents an ideal venue towards improved financial management performance. Participating municipalities will undergo a municipal financial self-assessment exercise designed to improve municipal creditworthiness and access to finance. The results of the assessment will be captured in a customized action plan which will address the identified challenges and needs for each municipality.