The impact of Fiscal decentralization on regional development

Fiscal decentralization of power from the central to the local level in North Macedonia officially began on July 1st, 2005, and after 20 years there are some changes but in general more than 50% of LGSUs gets transfers from the central government financing were the institutions are located and not real competences for local services, the capital grants don’t follow the municipal development, migration from rural area to urban is more and more evident, this mean that the system from start creates misbalanced financing of LGSUs. The main issue is fiscal decentralization and balanced regional development are closely related instruments and there is a need when making policies for one of these instruments of economic progress to take into account the both of them. RNM, on the one hand, does not have success in the balanced regional development, and on the other hand, there is a need expressed by the Government and other stakeholders for advancing of decentralization. So far, researches are prepared about balanced regional development and fiscal decentralization, but those researches are thematic and concern either regional development or decentralization separately as separate phenomena and do not go into the interactions and impact of fiscal decentralization on the balanced regional development in RNM. This analysis aims to fill that research gap because these phenomena in real life do not act separately from each other and certainly have mutual influence. This is important for policy makers to know that in the advancing of fiscal decentralization laws and policies, those policies and laws cannot separate these two instruments as separate instruments for achieving national goals. For RNM, in addition to the relatively high unbalanced in regional development, it is even more worrying that this, measured by the coefficient of variation of GDP per capita for the regions, is increasing in the period from 2011 to 2022.