Strengthening the Financial Sustainability of Serbian Local Governments by Improving their Efficiency and Effectiveness

This paper examines the financial sustainability of local governments in Serbia, focusing on the historical evolution of the local government system, revenue and expenditure trends, and reforms aimed at enhancing efficiency and effectiveness. The findings indicate that while the transition to a single-tier model and various reforms have provided stability, challenges remain. Key issues include limited fiscal autonomy, demographic decline, and the disparities of financial resources across municipalities. The paper highlights that although property tax decentralization and the introduction of new local revenue sources have improved revenue collection, differences in expenditure and resource allocation affect the equitable development of local communities. The paper also identifies that administrative reforms, digitalization, and inter-municipal cooperation have enhanced efficiency and service delivery, but further steps are necessary to ensure comprehensive and sustained financial health. Ultimately, it suggests that to achieve long-term financial sustainability, Serbian local governments need reforms that promote greater fiscal autonomy, equitable resource allocation, and a balance between infrastructure investment and social services, shifting towards the latter.