Improving subnational governments’ resilience in the wake of the COVID-19 pandemic

The COVID-19 pandemic has had devastating effects on lives, the economy, and the public finances worldwide, drawing attention to the need to enhance resilience to future shocks. This paper focuses on subnational governments, given their important and growing role in the provision of essential public goods and services worldwide. The paper discusses key aspects of subnational resilience, in particular the sensitivity of subnational finances to macroeconomic cycles and shocks and the availability of fiscal buffers; the main factors influencing subnational governments’ ability to provide essential services during crises; and their ability to anticipate and prepare for future shocks, especially those related to climate change. The paper also discusses policy and institutional reform options for both national and the subnational governments to strengthen subnational resilience.