Intergovernmental Transfer System in Serbia – Current Issues and Chalanges

Intergovernmental transfer system is one of the key components of the local governmental financing system. It role is to equalize the position of the local governments (LGS) and in this way to enable them to fulfill large variety of competencies which have been in the last couple of decades broaden far beyond the traditional one, which includes areas of local administrations and various social functions. Nowadays, these competences include issues such as local economic development, local infrastructure development, local investment programs, pro-active local employment policy and other. The issue of LG financing and the specific role of intergovernmental finance system in Serbia has been especially emphasized with enforcement of law on local government financing (2007), the intention was to insure the stable and predictable source of LGS financing which should decisively contribute to improve the effectiveness of management process in planning and implementing local budgets. Unfortunately, just after two years of applying of the law, the global finance crises broke and the strongly negatively impacted its effects, which eventually resulted in its suspension in some of its most important aspects.