Improving municipal finance for climate smart cities’ governance

Arshed Rafiq, Sustainable Business Solutions pvt ltd

Pakistan is the eighth most climate vulnerable country in the world, with the country experiencing major natural disasters and epidemics during the last decade. High urbanisation and population growth rates have further aggravated the situation and have put enormous pressure on urban infrastructure, municipal finance and service delivery systems.

The 18th amendment to the constitution of Pakistan heralded an era of devolution of powers from the centre to the provinces. However, city level local governance has received little attention in the devolution plan. The capacity and resources of city governments and their associated entities remain at low levels, due to poor municipal finance systems. Some steps have been taken in Punjab province of Pakistan to improve the situation. For example:

  • The Punjab Cities Governance Improvement Programme has been started with a funding injection of 150 million dollars from the World Bank. The project is streamlining different financial streams of the five largest cities of Punjab, and improving transparency in their operations;
  • Waste management and energy efficient mass transit systems have been introduced, which can potentially improve resource productivity of municipalities in the long run;
  • Urban immovable property tax system has been upgraded through digitisation of land records. This has resulted in an enormous increase in financial resources of the municipalities;
  • Resource efficiency has been brought in, with the introduction of new technologies for different municipal functions and services. These include remote sensing and GIS mapping for disaster management, health, land and infrastructure management;
  • City level cooperation, especially with Istanbul, has been promoted to build new infrastructure, water and sanitation and solid waste management projects in Punjab; and
  • Some revenue generation best practices have emerged in different city districts. New areas of revenue generation have been identified to improve the resource capacity of the municipalities.

These efforts can be scaled up and replicated in other districts and regions to increase the resources and coping capacity of the country for urbanisation and climate induced risks. Internationally, city level governance should be given the foremost importance, and municipalities equipped with necessary resources for improved preparedness and response from the municipal authorities.

In addition to local initiatives, research is needed to identify, implement and evaluate international best practices and draw lessons for the improved governance and municipal finance system in Pakistan and elsewhere. Some of the best practices include:

  • Improving the creditworthiness of cities through self generation of revenues and other measures. Getting an international or local credit rating takes an average of three to five years. The city of Lima took about five years to achieve creditworthiness status;
  • Investing in greening of infrastructure through private financing mechanisms. The World Bank estimates that every dollar invested in the creditworthiness of a developing country city is likely to mobilise more than $100 in private sector financing for low-carbon and climate-resilient infrastructure;
  • Planning for compact cities development by developing greenhouse gas inventories and tools for emissions reduction potential;
  • Financing resource efficient systems such as energy efficient street lighting. This will result in improved financial health of municipalities;
  • Exploring international funding streams, technical assistance and best practices such as World Bank’s Low carbon Liveable Cities Initiative, Green climate fund and project linked bonds.

With an improved municipal finance system, achieved through a right mix of local and international best practices, climate smart cities can be developed and maintained in Pakistan under the existing institutional framework of the country.