Without any further delay, the Lebanese government must rise up to the challenges of an unprecedented humanitarian crisis. The substantial population shock resulting from the massive influx of Syrian refugees has placed the already weak local service delivery system under immense pressure today. Due to administrative and fiscal constraints, municipalities are unable to serve the increasing demands of their growing constituencies, let alone invest in local economic development.
 
The municipal finance system is fraught with many shortcomings and gaps. The Independent Municipal Fund (IMF) is based on unfair distributional criteria that lead to an improper allocation of resources. Furthermore, the disbursement of the funds is non-transparent and most often not on time. The local taxation system is characterized by low tax collection rates, lack of a diversified portfolio of revenues and accumulated unpaid taxes. Furthermore, municipalities are underutilizing much-needed complementary fiscal resources that could fill the investment gaps.
 
This policy brief calls for setting more equitable distribution criteria for the IMF as well as improving timeliness of and transparency in the disbursement of funds. The taxation system ought to be revised and steps must be taken in order to improve the municipalities’ capacities to administer and collect taxes. The government must reconsider the decision to prohibit municipalities from taking out loans and must consider and encourage the role of the private sector in investing in local economic development in joint cooperation with the municipalities.