Strategic Moves - Regional Environmental Center for Central and ...

Introduction
The financing of environmental infrastructure investments in SEE comes from
several clearly identifiable sources:
• the state budget;
• municipal budgets;
• extra-budgetary funds;
• grants from the European Union;
• grants from bilateral donors;
• loans from IFIs;
• loans from other commercial banks; and
• own funds of a municipal, county or publicly owned company or utility.
The authors are of the opinion that there is a place for all these sources of financing
and that national governments should have a clear strategy regarding which
sources to use for which types of projects and investments.
It should be emphasised that there are difficulties and obstacles in relation
to the different sources of financing, which can be overcome by employing
a differentiated approach.
Domestic sources of finance
Public (state, county, municipal etc.) budgets play an essential role in financing the
rehabilitation of and capital investments in environmental infrastructure. Although
in most cases they are insufficient to meet environmental investment needs they reflect
two important things: the nominal size of the national and municipal budgets;
and, more importantly, the priority (in terms of the percentage of the total budget)
that the country attaches to environmental investment. While GDP and consequent
budget growth are a slow process dependent on many factors, budgetary allocations
for the environment are entirely an issue of priority and can be influenced.
National budgetary funds are also of huge importance for providing national
co-financing for projects in which a large share is financed from EU or bilateral
grants and/or IFIs. Other sources of co-financing are loans to government; local
budgetary funds; loans to municipalities; loans to utility companies; the private sector
(as part of a public-private partnership arrangement); and carbon financing.
In principle, local government activity is financed through the income collected
from local taxes, fees, other sources of local income (e.g. rent or sale of local properties,
interest, fines, subsidies, and grants/donations), and funds transferred from the
central budget, as well as their own share of national taxes. Municipalities can also borrow
funds for local public purposes, according to the criteria set by special laws.
The coordination of environmental financing flows at national level is of primary
importance to ensure complementarity in the financing of environmental in-
S T R AT E G I C M O V E S 147