Albania: Aligning Territorial and Fiscal Decentralisation

  • Elton Stafa
  • Merita Xhumari


This chapter provides an overview of decentralisation reforms in Albania over the last 25 years. Although offering a similar bundle of instruments, decentralisation reforms undertaken across four distinct periods differ substantially in terms of scope, incentives, and outcomes. Albania has established the building blocks for effective local governance. Yet, significant challenges remain, in particular in the fiscal dimension of decentralisation. Local tax powers, and thereby local finances, continue to be sacrificed to serve “higher causes” by subsequent national governments which seek to retain control over specific financial instruments to influence capital investments at the local level. Recent reforms offer great opportunities, which might be lost if they are not effectively implemented and complemented by additional measures that remove constraints on local revenue-raising options.


Fiscal decentralisation Local self-government Territorial and administrative reorganisation Political economy Albania 


  1. Bahl, W. R., & Linn, F. J. (1992). Urban public finance in developing countries. Oxford: Oxford University Press.Google Scholar
  2. Banks, C., & Pigey, H. J. (1998). Republic of Albania opportunities and issues for municipal reform. East European Regional Housing Sector Assistance Project 180-0034. Washington, DC: USAID.Google Scholar
  3. Brahimi, F., Baholli, F., Haldeda, N., & Dika, I. (2013). Decentralisation reform, case of Albania. Mediterranean Journal of Social Sciences, 10(4), 524–531.Google Scholar
  4. Council of Europe. (2011). Albania baseline assessment report on inter-municipal cooperation in local governance.Google Scholar
  5. Hoxha, A. (2002). Local self-government and decentralisation: Case of Albania: History, reforms and challenges. Tirana: Institute for Contemporary Studies.Google Scholar
  6. Hoxha, A. (2007). Does decentralisation support good governance? Decentralisation in Albania—A top down perspective. CIS Working Paper, No. 31.Google Scholar
  7. Ministry of Finance of Albania. (2015). Macroeconomic and fiscal indicators.Google Scholar
  8. Ministry of Finance of Albania. (2017). Consolidated fiscal indicators of the general government. Retrieved from
  9. Network of Associations of Local Authorities in South-East Europe (NALAS). (2015). Fiscal decentralisation indicators for Southeast Europe, 2006–2014. Retrieved from
  10. Oates, W. E. (1993). Fiscal decentralisation and economic development. National Tax Journal, 46(2), 237–243.Google Scholar
  11. Oates, W. E. (1999). An essay on fiscal federalism. Journal of Economic Literature, 37(3), 1120–1149.CrossRefGoogle Scholar
  12. Oates, W. E. (2005). Toward a second-generation theory of fiscal federalism. International Tax and Public Finance, 12, 349–373.CrossRefGoogle Scholar
  13. Oates, W. E. (2008). On the evolution of fiscal federalism: Theory and institutions. National Tax Journal, LXI(2), 313–334.CrossRefGoogle Scholar
  14. USAID Planning and Local Governance Project (PLGP) in Albania. (2015). Creating an equitable, transparent and predictable unconditional grant formula. Retrieved from
  15. USAID Planning and Local Governance Project (PLGP) in Albania. (2016a). A profile of municipal finance system in Albania: The need for a framework law on local finances. Retrieved from
  16. USAID Planning and Local Governance Project (PLGP) in Albania. (2016b). Key recommendations for the development and discussion of the law on local government finances. Retrieved from
  17. USAID Planning and Local Governance Project (PLGP) in Albania. (2016c). Local government finances in Albania 2002–2015. Retrieved from
  18. USAID Planning and Local Governance Project (PLGP) in Albania. (2017). After territorial administrative reform and on the eve of the implementation of the law on local government finance. Retrieved from
  19. Weingast, B. R. (2009). Second generation fiscal federalism: The implications of fiscal incentives. Journal of Urban Economics, 65, 279–293.CrossRefGoogle Scholar
  20. Weingast, B. R. (2014). Second generation fiscal federalism: Political aspects of decentralisation and economic development. World Development, 53, 14–25.CrossRefGoogle Scholar
  21. World Bank. (1994). Fiscal decentralisation and intergovernmental finances in the Republic of Albania.Google Scholar
  22. World Bank. (2008). Albania local finance policy note: Programmatic public expenditure and institutional review.Google Scholar

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Elton Stafa
    • 1
    • 2
  • Merita Xhumari
    • 3
  1. 1.USAID AlbaniaTiranaAlbania
  2. 2.The Network of Associations of Local Authorities of South-East EuropeSkopjeMacedonia
  3. 3.University of TiranaTiranaAlbania

Personalised recommendations