In many countries, the responsibilities for the provision and financing of public services are being increasingly decentralized. In transition and developing economies, the expanded local government role in service delivery is often hindered by limited financial resources, as well as weak institutional capacity particularly in terms of inadequate financial, practices, management and know-how. In this context, this note reviews the broad range of parameters pertaining to a sound local government finance system, including local government capacity and potential to access private capital markets in a way consistent with  macroeconomic stability and policy objectives.

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