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Local governance is critical for poverty reduction. Local governments have a natural advantage in knowing and understanding the needs and resources of their own territories and so they can provide better local public goods to meet the demands of their populations. However, while the debate on governance has focused on the institutions of the national state less attention has been given to sub-national governments. And while decentralization reforms cross the developing world have advanced, their implementation continue to face critical challenges: legal frameworks are often inconsistent, sub-national authorities lack the capacity to implement them, the budgets are limited or have grown beyond their competencies and opportunities for sustainable economic development have not accompanied new political accountability at the local level.