The year 2011 marked a major turning point in Tunisia’s approach to local governance. Demands grew for a fairer distribution of power and resources between the central government and the regions, as well as for stronger local authorities capable of managing community affairs and responding more effectively to citizens’ needs.
However, the transition toward decentralization involved more than transferring administrative responsibilities. It raised a fundamental question: do municipalities and local authorities have the financial resources required to exercise these responsibilities effectively and independently?
The report, “Local Finance in Tunisia Between 2011 and 2021: Prospects and Challenges,” provides an analytical overview of a decade of changes in Tunisia’s local finance system. It examines the legislative, institutional, and financial reforms introduced during this period and explores the gap between the legal framework supporting decentralization and the resources actually available to local authorities.
The report approaches local finance not simply as a technical or accounting issue, but as a key measure of the success of decentralization. Local authorities that lack adequate resources or remain heavily dependent on transfers from the central government cannot exercise genuine independence or implement development programmes based on local priorities.
A New Legislative Framework for Local Finance
The report examines the legislative transformation that Tunisia experienced after the 2011 revolution, particularly following the adoption of the 2014 Constitution. The Constitution established new foundations for local governance and recognised the principles of administrative and financial autonomy and self-governance.
It also stipulated that the transfer of new responsibilities to local authorities should be accompanied by the transfer of sufficient financial resources. This principle was intended to prevent decentralization from becoming a process in which municipalities receive additional responsibilities without the funding required to fulfil them.
This process was reinforced by Organic Law No. 29 of 2018 on the Local Authorities Code, which elaborated on several constitutional principles, including:
- Distinguishing between local authorities’ own-source revenues and resources transferred by the state.
- Linking the transfer of responsibilities to the provision of appropriate funding.
- Applying the principles of solidarity, equalisation, and financial adjustment to reduce disparities between municipalities.
- Strengthening the ability of local authorities to manage their own resources.
- Establishing subsequent financial oversight in accordance with the principle of self-governance.
These legislative developments represented important progress compared with the system that existed before 2011. Nevertheless, the report identifies a significant implementation gap caused by delays in issuing several implementing regulations and by the failure to fully align public accounting and financial legislation with the new local governance framework.
New Institutions to Support Decentralization
The reforms were not limited to legislation. Tunisia also created institutions and administrative structures intended to support local authorities and strengthen their financial and managerial capacities.
One of the most prominent developments was the establishment of the Ministry of Local Affairs and Environment in 2016. The ministry was responsible for supporting decentralization, promoting local development, and building municipal capacities.
Transferring responsibility for local affairs from the Ministry of Interior to a specialised ministry represented an important shift. It reduced the direct influence of the Ministry of Interior over municipalities and contributed to strengthening the institutional autonomy of local government.
The report also examines the roles of several other bodies, including:
- The General Authority for Foresight and Support of the Decentralization Process.
- The High Authority for Local Finance.
- The High Council of Local Authorities.
- The Loans and Support Fund for Local Authorities.
- The Training and Decentralization Support Centre.
However, creating these institutions was not sufficient on its own. Some remained unable to perform their intended roles because of limited human and financial resources. Others were inactive because the political and institutional structure of decentralization had not been fully completed, including the failure to hold elections for regional and district councils during the period covered by the report.
Increased Transfers Without Full Financial Autonomy
Direct financial transfers from the state budget to local authorities increased significantly from 2016 onward. By 2021, these transfers had reached approximately 680 million Tunisian dinars, representing nearly 30% of the total value of local finance.
These figures demonstrate the importance of state intervention in maintaining municipal financial stability. At the same time, however, they reveal the continuing dependence of local authorities on central government funding.
This dependence limits the ability of municipalities to plan independently and makes their programmes vulnerable to changing central government priorities and decisions.
The report identifies two main categories of financial transfers.
The first consists of operating transfers intended to help municipalities cover their mandatory expenses. Salaries alone account for more than 60% of operating revenues in many municipalities.
The second category supports development plans and investment projects through grants, loans, and national programmes. Access to these resources is generally linked to conditions related to transparency, performance, municipal approval procedures, and the capacity to implement projects and repay loans.
Although such conditions may contribute to improved financial governance, the report notes that financing requirements and prior oversight can restrict municipal autonomy, particularly when they lead to the rejection of projects already approved by elected municipal councils.
Significant Disparities Between Municipalities
One of the report’s most important findings concerns the unequal distribution of local revenues across Tunisian municipalities.
A limited number of large municipalities, particularly those located in coastal and economically active areas, receive a disproportionately large share of local resources. Meanwhile, hundreds of other municipalities must divide the remaining funds among themselves.
According to the figures presented in the report, 24 municipalities representing approximately 27% of the population receive nearly half of all own-source local revenues. By contrast, 326 municipalities representing around 73% of the population share the other half.
These figures demonstrate a major imbalance in the financial capacities of local authorities. Municipalities located in economically active areas generally have broader tax bases and stronger revenue collection opportunities. Municipalities in inland or less-developed regions, however, often struggle to finance even their basic operating costs, let alone implement new development projects.
This highlights the importance of solidarity and financial equalisation mechanisms. Such mechanisms should not be treated as temporary assistance, but as essential tools for ensuring fairer resource distribution and providing citizens with comparable levels of public services regardless of where they live.
Why Do Municipalities’ Own-Source Revenues Remain Limited?
The report explains that the weakness of local finance is not solely the result of insufficient transfers from the central government. It also reflects municipalities’ limited capacity to develop and collect their own revenues.
The main sources of local revenue include property taxes, fees on industrial and commercial activities, market concession fees, and charges for municipal services.
However, revenue collection faces several obstacles, including:
- Failure or reluctance among taxpayers to meet their obligations.
- Weak collection and enforcement mechanisms.
- Incomplete or outdated property and tax databases.
- Limited administrative capacity within many municipalities.
- Significant differences in economic activity and revenue potential between regions.
At the same time, rising expenditure has placed additional pressure on local budgets. Salaries, fuel, and electricity consume a significant share of municipal resources.
The COVID-19 pandemic further intensified these pressures. Municipal revenues declined while local authorities faced additional expenses related to public health measures, limiting the spread of the virus, and managing emergency local services.
Governance and Citizen Participation
Despite these challenges, the report identifies several positive developments in local financial governance.
Municipalities received broader responsibilities for preparing their own budgets and development plans and for managing their financial and human resources. Modern management systems, internal auditing, and oversight mechanisms contributed to improved transparency and revenue collection in several municipalities.
Decentralization also created greater opportunities for citizens and civil society organisations to participate in local decision-making. This included involvement in annual development programmes, participatory budgeting, and discussions about municipal priorities.
Such participation can gradually shift citizens’ role from being passive recipients of public services to active contributors who help identify local needs, monitor municipal performance, and assess public projects.
Municipalities can also expand their funding opportunities through cooperation with neighbouring local authorities and partnerships with civil society, the private sector, and national and international organisations.
These partnerships are particularly important in sustainable development and environmental projects, including waste recovery, renewable energy, and initiatives aimed at improving the quality of local public services.
Reforms Required to Strengthen Financial Autonomy
The report concludes that genuine decentralization in Tunisia requires progress in two interconnected areas.
The first is the development of local authorities’ own-source revenues to strengthen their autonomy and their contribution to local development. The second is the completion and modernisation of the legislative and institutional framework governing local responsibilities and relations with the central government.
The report proposes several recommendations, including:
- Establishing additional municipal tax collection offices.
- Improving the efficiency of local revenue collection.
- Adjusting municipal fees to reflect the actual cost of services.
- Allowing municipalities greater flexibility in setting certain fees according to local conditions.
- Increasing state contributions to municipal development projects.
- Simplifying lending conditions and reducing interest costs.
- Transferring certain state-owned properties located within municipal areas to local authorities free of charge or for a symbolic amount.
- Clarifying the distribution of responsibilities between state institutions and local authorities, particularly in education and healthcare.
- Developing a unified legal framework for local taxation that covers municipal, regional, and district levels.
- Allocating a proportion of selected national taxes to local authorities, including income tax, value-added tax, vehicle circulation fees, and taxes on real-estate capital gains.
- Strengthening mechanisms designed to reduce financial disparities between regions and municipalities.
- Establishing a dedicated fund for regional and local development.
Decentralization Begins With the Capacity to Act
Tunisia’s experience between 2011 and 2021 demonstrates that recognising decentralization in constitutional and legal texts is important, but insufficient on its own.
Administrative autonomy without adequate financial autonomy has limited practical value. When municipalities lack sufficient resources, struggle to collect their revenues, or remain dependent on central government transfers, their ability to deliver services, promote development, and respond to citizens’ priorities remains restricted.
The report therefore presents local finance as the foundation of decentralization rather than merely one of its components. The success of local governance must ultimately be measured by the ability of elected local authorities to make decisions, mobilise resources, implement projects, and remain accountable to their communities.
“Local Finance in Tunisia Between 2011 and 2021: Prospects and Challenges” offers researchers, local officials, civil society organisations, policymakers, and citizens a focused assessment of Tunisia’s local finance system. It highlights the reforms achieved during this period, the structural challenges that remain, and the measures required to build a fairer, more independent, and more effective system of local governance.
Download the Full Report
For detailed analysis, figures, and policy recommendations, read and download the complete report in PDF format: