Over the last two decades, the countries of Eastern Europe, Caucasus and Central Asia (EECCA) have undergone significant political and economic reforms that, for most, resulted in sustained economic growth. However, the recent global financial and economic crisis that began at the end of 2008 hit the region hard, and virtually all countries suffered a sharp contraction of their economies. Amongst other things, the crisis revealed a multitude of structural weaknesses in the public financial systems of the EECCA countries that badly affected their economic performance. While the crisis has seriously affected EECCA economies, it also provides an opportunity for the governments of these countries to speed up the implementation of public finance reforms, and, in this context, to exploit opportunities to green their budgets in order to provide a more environmentally sustainable basis for further development.

Public environmental expenditure remains crucial for addressing environmental problems and, more broadly, promoting a greener model of development in the countries of Eastern Europe, Caucasus and Central Asia (EECCA). Traditionally, however, the environmental sector in the EECCA countries has not been very effective in attracting domestic public financing. As the global economic and financial crisis imposes ever-tighter constraints on public budgets in the region, and as donors shift to new approaches of delivering aid via country systems, this sector becomes increasingly vulnerable to underfunding.