The second pillar of public administration reform is the decentralization process in Moldova, which has gone through several stages and was affected by changes in the political power systems in charge of state administration and produced improvements and lost grounds. Local governments have to play a significant role in the provision of basic public services, including social services, and bear primary responsibility for water supply and sanitation, road construction, maintenance and heating. Currently, with 32 rayons, the local governments are left fragmented and underfinanced, providing services that are still largely inadequate and of poor quality or not providing them at all. Local authorities have limited fiscal autonomy and limited fiscal potential and their budgets depend on higher levels of government. The transfer system is inefficient, unpredictable, opaque, and provides little incentive for fiscal responsibility.

Since 2009, the government explicitly acknowledged that decentralization represents an essential item on the country's reform agenda, especially important given the European Union integration aspirations of the country. The goal is to improve resources management and bring quality services closer to citizens; to strengthen the system of local fiscal autonomy (in line with European Union standards); to give more decision-making powers to the local governments following the principles of transparency, legality, efficiency, responsibility and administrative solidarity; and to create a more stable, clear, and enforceable legal framework on local public finance. With this overarching goal in mind, a draft Decentralization Strategy is undergoing various mandatory consultations before it is submitted to the Parliament for consideration and approval. This process will be continued with the development of sector decentralization strategies.

The nature of the land reform process carried out during the nineties has contributed to the chronic structural nature of rural poverty. It provided for most small and fragmented areas making anything other than subsistence agriculture impractical. Rural infrastructure remains in poor condition: While the main roads and facilities are in fair condition, it is the condition of rural roads, energy supplies and water supplies for both domestic and irrigation needs which have the greatest negative impact on agricultural-based income. The relative lack of provision of appropriate financial products and tools for agricultural-based rural enterprises remains a further serious constraint on the growth of incomes from these sources.