Good governance rarely trends on social media or dominates the news, but it is the quiet engine of progress. Behind every new school, hospital, digital service or green energy project is a system built on fair rules, strong institutions, and transparent public finance. When governance fails, the costs are real: lost resources, stalled reforms, and public mistrust. That’s why UNDP in Europe and Central Asia is working to improve how public money is spent, how decisions are made, and how institutions are held accountable. These efforts may not always be visible, but they are laying the foundation for something bigger: trust in institutions and a more resilient economy. 

Corruption has its cost and people feel it

Corruption isn’t just a political issue, it’s something people feel every day. When roads crumble, medicines run out, or young people seek opportunities abroad for a better future, corruption is often part of the story. 

Corruption is a significant drain on economic wealth, with global losses estimated at around 5% of GDP. These losses are mirrored in weak governance performance across the Western Balkans where 2024 Corruption Perceptions Index scores range from 33 in Bosnia and Herzegovina to 46 in Montenegro, averaging 40—far below the EU’s 64. Businesses also consistently see corruption as a major growth barrier.

This shows how deep-rooted corruption holds back growth, slows progress, and frustrates people’s daily lives.
 

Public finance reform as corruption prevention

Transparent and accountable public finance is key to preventing corruption. When financial systems are clear and well-managed, they ensure that resources reach those who need them, resist vested interests, and build citizen trust. 

In the Western Balkans and Moldova, supported by the Slovak Ministry of Finance, UNDP is partnering with governments to implement significant reforms. These changes aim to enhance institutions' ability to manage and spend public funds fairly and efficiently, supporting progress toward EU membership. 

This support focuses on building institutional capacities, ensuring compliance with international standards, and enhancing systems through improved fiscal management. 

The cost of staying hidden

The informal economy is difficult to estimate and operates under the radar, evading taxes, draining public resources and weakening the economy. In the Western Balkans, UNDP is introducing fresh approaches to formalize informal businesses and improve tax compliance through institutional collaboration.

In North Macedonia, for the first time in nearly two decades, we helped estimate the shadow economy’s size, helping shape the 2023  Action Plan for Formalization. Public outreach helps communities understand why formalization matters-for fairness, better services, and economic growth. While an online calculator helps businesses weigh the costs of staying informal versus formalizing.

In Montenegro, a new Programme aims to reduce informality from 20% of GDP to below 17%. The programme tackles complex regulations and brings private sector onboard to create a fairer, transparent market. The focus isn’t just on tax revenue, it’s about creating formal jobs, especially in green sectors, and building trust in the economy.

Closing revenue leaks and strengthening transparency

Effective finance means knowing where money comes from and where it goes. That’s why many countries are shifting from traditional accounting (tracking cash flows only) to systems that records financial activity when it actually happens. Since 2014, UNDP has supported  Montenegro in modernizing public finance by strengthening accounting laws and building institutional capacity  The new accounting system will roll out in 2026. A promising example is the work with the Montenegrin Games of Chance Administration  where stronger capacities improved regulation and public revenue, supporting Montenegro’s EU accession goals, especially in fighting money laundering and terrorism financing. 

In North Macedonia, a new Strategy for implementing accrual accounting and action plan aim to improve budget accuracy through accrual accounting.. UNDP also supported the Public Revenue Office in rolling out fairer tax rules for international companies, enabling  local experts to produce the country’s first detailed transfer pricing reports, helping global companies pay their fair share and strengthening the tax base.

These reforms do more than the technical changes, they prevent revenue loss, build public trust, and unlock resources for inclusive growth. 

Rewiring resilience systems  

Our work is not just about compliance, it's about using public finance to power sustainable development. In Moldova, Development Finance Assessments and sector-wide spending reviews in health care and  agriculture helped the government redirect resources toward key national priorities. Health care review insights shaped the 2024 budget, showing how smarter spending improves services.

In Bosnia and Herzegovina, we helped align sustainable development financing into budgets across all levels of government. A closer look at public spending identified context-specific tools, informing a national SDG financing framework and making sure budgets support the long-term sustainable growth. UNDP-supported SDG Public Expenditure Reviews show Bosnia and Herzegovina spends the equivalent of 5.6 billion convertible marks annually on SDG-related areas but lacks adequate funding, underscoring the need for better financing strategies. In North Macedonia, UNDP supports the government in aligning public finance and mobilizing innovative investments with the National Development Strategy and the SDGs.

Driving finance reform at local level

Our work extends from high-level finance ministries to the town halls. In Bosnia and Herzegovina, local governments are digitizing public asset registers, strengthening financial controls, and making budgets more transparent to boost local investment. 

In Montenegro, citizen budget guides and financial risk tools are increasing transparency and accountability. In North Macedonia, a digital property tax pilot in Sveti Nikole has boosted local revenues by 250%. These kinds of improvements help deliver better services and reduce corruption.

A governance-first development agenda 

To sustain progress, the message is clear: effective, accountable, and inclusive governance is essential. Anti-corruption is not a parallel agenda, it is a precondition for trust, inclusive growth, and sustainable investment.

At UNDP, we remain committed to embedding anti-corruption, strengthening financial integrity, and empowering institutions and communities to deliver for all.