This report is prepared under the contract provisions signed between CEA and USAID for nonexclusive services to USAID as part of the grant agreement and specifically after the USAID BEA project asked for assistance in the area of fiscal decentralization. This report is illustrating the status of the process of decentralization in Macedonia as of June 2007 with emphasis on the subsovereign borrowing issues and is based on previous projects conducted by CEA and the author.