There is substantial coordination between central government and municipal governments on municipal capital expenditure. Most capital transfers between central and municipal governments are decided by a special commission under the Ministry of Regional Development and Infrastructure (MRDI) that also includes representatives of the Ministry of Finance (MoF).
The commission uses a formula based on population, except with respect to Tbilisi and Adjara which comprise about half of the population, to determine annual indicative allocations for capital transfers to each municipality. It then notifies the municipalities of the indicative allocations—although not necessarily six months before the start of each fiscal year— and the municipalities submit capital projects to the commission for approval within these allocations. The commission approves the projects individually and makes the transfers on a perproject basis, to match the contractual requirements for payment, so that municipalities are notified about expected transfers as soon as the projects are approved.
Resulting from this process, the commission has comprehensive information about the central government’s commitments to fund these projects. The criteria applied by the commission to approve projects are defined by government decree. There is no coordination between municipalities and central government on projects funded by municipalities’ own resources.
IMF
