Building Strong Municipal Financial Systems Vital for African Sustainable urban Dev’t

Addis Ababa December 23/2024 (ENA) — A resilient and financially empowered city is essential to the country’s broader goals of industrialization, economic transformation, and inclusive and sustainable growth, Atkeyelsh Persson, Chief, Urbanization and Development Section, Gender, Poverty and Social Policy Division, of the Economic Commission of Africa (ECA) said.

Persson made this remark at a Senior Officials and Experts Meeting held in Bishoftu to review and validate the Financial Performance Assessment Report of Addis Ababa City.

ECA in collaboration with UN-Habitat, the UN Capital Development Fund (UNCDF) and the Municipal city of Addis Ababa organized the meeting to offer a valuable opportunity to exchange experiences and lessons learned from Addis Ababa with other African cities.

In the context of the rapidly expanding city of Addis Ababa, Persson said financial performance assessment is critical for expanding the city's financial capacity as it helps evaluate financial management, identify areas for improvement, and ensure efficient use of resources.

“By analyzing revenues, expenditures, and financial health, the financial performance assessment enables a city like Addis Ababa to make informed decisions on budgeting, resource allocation, and investments,” Persson added.

According to her, it will support long-term planning and infrastructure growth and strengthen the city's financial capacity to meet the rising demand for services, enhancing economic resilience and development prospects.

Furthermore, she highlighted the importance of partnerships between local governments and international organizations that mutually support one another to generate actionable insights that expand municipal fiscal space and improve service delivery.

Reliance on traditional sources of funding, such as intergovernmental transfers and local taxes, is often insufficient to meet the demands of modern urban development, Chief Persson said, and underscored “expanding fiscal space for cities requires innovative solutions that leverage diverse financing mechanisms, foster partnerships with the private sector and development partners, and improve governance and accountability.”

Addis Ababa City Manager at the rank of Deputy Mayor Wondimu Seta said that large-scale housing projects have been initiated, including affordable housing developments and upscale residential areas to manage the growing population of Addis Ababa city.

The government has also focused on urban renewal projects to revitalize older districts, he said, and noted “the implementation of a centralized and automated revenue management system is essential. By streamlining tax collection, integrating with other government systems, and enhancing transparency, we can significantly improve our city’s financial efficiency.”

He stressed that through tools like GIS-based property mapping, inclusion of the informal sector, and strategic tax adjustments, we can enhance fiscal autonomy and reduce overreliance on a few revenue sources.

“Equitable fiscal policies are vital for Addis Ababa’s development, and we must advocate for reforms that allow the city to receive a fair share of national revenue and empower us to make autonomous financial decisions,” Wondimu pointed out.

Training programs in system management, compliance, and taxpayer engagement would help meet the demands of a modern, efficient city administration, he stated, and added that collaboration with the private sector is key to unlocking investments in infrastructure and public services.

“By leveraging private resources, we can achieve more while fostering mutual benefits for the city and its business community,” Wondimu underscored.

Speaking on behalf of Ramiz Alakbarov, UN Resident Coordinator for Ethiopia, Jenifer Wakhungu, Deputy Director for Local Transformative Finance at UNCDF, said that the Financial Performance Assessment Report of Addis Ababa City forms a crucial component of the 15th tranche of the United Nations Development Account (DA-15) project, titled Expanded and Resilient Urban Fiscal Space for an Inclusive and Resilient COVID-19 Recovery in Africa.

 

“As partners, we share a common objective: to strengthen the capacity of city governments across Africa to develop and implement strategic policy reforms that expand and enhance urban fiscal space. These efforts are crucial to advancing broader national priorities,” Wakhungu affirmed.

The financial performance assessment of Addis Ababa is based on six key dimensions, providing a comprehensive framework for evaluating its financial health: liquidity and solvency, financial autonomy, operating performance, collection efficiency, asset management, and accounting and reporting, she elaborated.

She noted that cities must prioritize sustainability and resilience in their infrastructure projects to ensure they can adapt to evolving social, economic, and environmental needs.

The DA-15 project, and specifically the financial performance report, contributes to both the global and continental development agendas. It directly supports Sustainable Development Goal 11 on sustainable cities and communities, while also reinforcing the Addis Ababa Action Agenda on financing for development.