## LESSONS FOR EFFECTIVE FISCAL DECENTRALIZATION IN SUB-SAHARAN AFRICA

## Source details

**Canonical URL:** [LESSONS FOR EFFECTIVE FISCAL DECENTRALIZATION IN SUB-SAHARAN AFRICA](https://www.imf.org/-/media/files/publications/dp/2018/45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/dp/2018/45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa.pdf.md)
- [Structured JSON version](/-/media/files/publications/dp/2018/45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa.pdf.json)

---

### Determinants and effectiveness
- Major driving forces behind fiscal decentralization in sub-Saharan Africa:
  - efforts to defuse ethnic conflicts;
  - initial level of income (GDP per capita);
  - urbanization rate.
- Strength of democracy (polity index) is not an important determinant for decentralization.
- Fiscal decentralization is associated with higher growth in the presence of stronger institutions.
- Empirical logit findings (sample: 39 SSA countries; decentralization = share of subnational spending ≥ 5 percent):
  - Predicted probability of being decentralized ranges from 0.15 to 0.2 across specifications.
  - GDP per capita (log) marginal effects: 0.37*, 0.21*, 0.31**, 0.32* (robust standard errors reported in parentheses).
  - Population density (log) marginal effects: 0.16*, 0.083, 0.14, 0.16.
  - Urban Population (%) marginal effects: 20.025*, 20.014**, 20.023**, 20.025**.
  - Ethnic fractionalization (Ethnic-SM: 1.33*; Ethnic-Roeder: 1.20* in some specs).
  - Number of Countries: 39, 38, 38, 38. Pseudo R-squared: 0.33, 0.37, 0.34, 0.42.
- Effectiveness:
  - Positive correlation between decentralization and growth conditional on institutional quality (OLS analysis).
  - No clear correlation between decentralization and improved income distribution in SSA.

### Pros and cons (macroeconomic trade-offs)
- Pros:
  - Better targeting and more resources for remote and rural areas (equity and redistribution).
  - Better information on local needs, more accountability (productive and allocative efficiency).
  - Potential to address perceived ethnic/political bias if accompanied by transparency and accountability.
- Cons / Risks:
  - Macro-fiscal risks: higher fiscal deficits, less flexibility to respond to shocks; common-pool transfers can lead to overspending and lower tax effort.
  - Vertical mismatch: spending responsibilities may exceed revenue-raising ability, increasing fiscal deficit and public debt.
  - Lower spending efficiency and nuisance taxes: weak local capacity and corruption may reduce efficiency; proliferation of low-yielding taxes with high compliance costs.
  - Political risks: devolution could encourage fragmentation along ethnic lines or decentralize corruption and elite capture.

### Spending assignments and modalities
- Four case studies: Kenya, Nigeria, South Africa, Uganda.
  - Allocation of spending broadly consistent with best practice across levels of government.
  - Uganda operates a deconcentrated system—subnational governments have little flexibility and upward accountability to the center.
  - Kenya, Nigeria, South Africa: subnational governments have broad spending autonomy (devolution).
- Division of functions:
  - National: policy, standard setting, national public goods (national security, macroeconomic policy).
  - Subnational: policy implementation and local service delivery (health, water, local roads, most agricultural extension, primary education—except Kenya where counties provide only preprimary education).

### Own revenues (assignment and performance)
- Assignment of taxing powers broadly in line with best practice: bulk of subnational revenue comes from property taxes and fees for local services.
- Own revenues are a small fraction of subnational spending due to weak cadasters and high informality.
- Reported shares of subnational spending financed by own revenues (case studies):
  - Uganda: about 5 percent
  - Kenya: about 10 percent
  - Nigeria: about 15 percent
  - South Africa: about 20 percent
- Cross-country and regional evidence:
  - Own revenue in sub-Saharan African countries with significant fiscal decentralization ranges from about 5 percent in Uganda to about 30 percent in Ethiopia.
  - GFS-based evidence: own revenue at the subnational level in low-income and developing countries is, on average, about 20 percent of general government revenue.
  - South East Europe: about 16 percent, on average, of total general government revenue.
- Policy recommendation:
  - Adopt national laws or a “closed list” of allowable revenue sources for subnational governments; central government should determine or set guidelines on tax bases and rates to avoid nuisance taxes.

### Transfers: design and practice
- Transfers are inevitable; spending decentralization has outpaced revenue decentralization in most countries.
- Required transfers in SSA range from about 75 percent of subnational spending in Ethiopia to about 95 percent in Uganda.
- Principles for transfer systems:
  - Transparent formula based on indicators outside subnational control (population, surface area, relative income, poverty).
  - Stability: set transfers as a fixed proportion of central revenue within a multiyear fiscal framework when possible.
  - Align incentives: transfers should encourage own-revenue collection and efficient management; set transfers ex ante during the budget process to avoid ex post gap-filling.
  - Flexibility: enshrine principles in constitution or legislation but allow periodic reassessment (examples: quinquennial assessments in South Africa and India).
- Case-study practice:
  - Kenya, Nigeria, South Africa: transfers mostly unconditional and formula-based with redistribution elements; Kenya and South Africa review formulas every five years.
  - Uganda: transfers largely conditional/earmarked with complex, nontransparent formulas (about 38 conditional grants).

### Hard budget constraints and borrowing control
- Countries successfully used strict fiscal rules to keep subnational borrowing under control:
  - Kenya: PFM law limits counties’ stock of debt and debt service to 20 percent and 15 percent, respectively, of the county’s revenue in the preceding year; long-term borrowing requires central approval and guarantee.
  - Nigeria: borrowing limited for capital projects and disallowed if the state is in arrears; external loans require central guarantee; stock-of-debt cap may not exceed 50 percent of last year’s revenue.
  - South Africa: stock-of-debt cap 50 percent of last year’s revenue; central guarantees for municipal borrowing prohibited; borrowing allowed for capital and bridging only.
  - Uganda: borrowing allowed subject to a cap (25 percent of locally generated revenue) and central approval.
- Best-practice rules include debt thresholds, “golden rule” for financing capital only, insolvency mechanisms, and enforcement via penalties or sanctions.
- Risks and circumvention: reclassification of current to capital spending, dipping into pension funds, and use of subnational corporations to bypass limits.
- Enforcement and transparent insolvency mechanisms (South Africa) complement borrowing limits and reduce moral hazard.

### Accountability, information, and PFM capacity
- Strong accountability frameworks are critical: regular collection, analysis, and reporting of fiscal operations help verify compliance and strengthen citizen oversight.
- PFM reforms are necessary to support decentralization: budget process reform, benchmarking, GFS classification, accounting standards, and charts of accounts.
- Recommendation: gradual decentralization aligned with phased strengthening of subnational PFM systems and capacity.

### Speed, sequencing, and asymmetric devolution
- Experience suggests gradual decentralization is preferable to big-bang approaches.
- Asymmetric decentralization is a tool when regions differ by culture/language or capacity:
  - Operationalize asymmetric devolution by conditioning greater autonomy on compliance with minimum PFM requirements.
  - Devolve first to units with better capacity (examples: Macedonia, urban centers in Bangladesh, Brazil, India).
- Sequencing must ensure that spending responsibilities are matched by identified financing resources and legal clarification (best practice: specify assignments in law for flexibility).

### Evidence on service delivery, growth, and inequality
- Service delivery evidence is mixed:
  - Positive correlations in some studies (e.g., educational attainment in OECD; infant mortality in Canadian provinces; Nigeria: lower mortality and higher literacy in some findings).
  - Decentralization can increase regional disparities in service delivery if equalization grants are insufficient.
  - Ethnic fractionalization can adversely affect access to public services in diverse jurisdictions.
- Growth evidence is inconclusive:
  - Thiessen finds a bell-shaped relationship in OECD countries.
  - Gemmell, Kneller, and Sanz find spending decentralization associated with lower growth and revenue decentralization with higher growth in OECD samples.
  - Type of decentralization (spending vs. revenue) matters.

### Case study: Kenya — key findings and figures
- Institutional change:
  - New constitution (September 2010) created two levels of government: national and 47 elected county governments (replacing ~175 local governments); county officials elected every five years.
  - Intergovernmental Budget and Economic Council coordinates county funding (chaired by vice president; includes 47 county finance ministers and national treasury cabinet secretary).
- Fiscal impact of devolution:
  - Transition approved almost all functions to counties in one go, quadrupling county spending within one year.
  - Total spending in the year devolution was rolled out increased by about 2 percent of GDP compared with the pre-devolution period.
  - Own revenue currently amounts to about 0.5 percent of GDP, equivalent to about 10 percent of total county spending.
  - Nairobi and Mombasa: own revenue about 50 percent and 35 percent of their respective total spending; most other counties: below 15 percent.
- Spending composition and rules:
  - Counties required to allocate 30 percent of budgets for development spending; development spending averaged about 35–40 percent during fiscal years 2013/14–15/16; about a third of counties missed the 30 percent target in 2015/16.
  - Wage spending amounted to about 40 percent of county spending in 2015/16, an increase of about 15 percent from the previous year.
- Transfer formula (Annex: percent of total):
  - Population: 45 percent (2012/13–15/16 and 2016/17–18/19)
  - Equal share: 25 percent (2012/13–15/16 and 2016/17–18/19)
  - Poverty level: 20 percent (2012/13–15/16); 18 percent (2016/17–18/19)
  - Land area: 8 percent (2012/13–15/16 and 2016/17–18/19)
  - Fiscal effort: 2 percent (2012/13–15/16); 1 percent (2016/17–18/19)
  - Development needs: — (2012/13–15/16); 1 percent (2016/17–18/19)
  - Personal emoluments: — (2012/13–15/16); 2 percent (2016/17–18/19)
- Borrowing and PFM regulation:
  - Constitution: county borrowing (except short-term liquidity) requires government guarantees and limited to financing development projects (golden rule).
  - 2015 PFM amendments: limits on gross debt and debt service for counties (up to 20 percent and 15 percent, respectively, of the county’s last audited revenues); require annual publication of county financial accounts; specify financial and criminal penalties for violations.

### Case study: Nigeria — selected findings and figures
- Federal structure and revenue sharing:
  - Federal, state, and local governments; number of states rose to 36 plus the federal capital by 1996.
  - Historical producing-state shares of oil proceeds (Annex Table 2.1, percent):
    - 1960–69: Producing State 50 Federation Account 50
    - 1969–71: Producing State 45 Federation Account 55
    - 1971–75: Producing State 45 (minus offshore) 55 (plus offshore)
    - 1975–79: Producing State 20 (minus offshore) 80 (plus offshore)
    - 1979–81: Producing State — Federation Account 100
    - 1982–92: Producing State 1.5 Federation Account 98.5
    - 1992–99: Producing State 3 Federation Account 97
    - 1999–Current: Producing State 13 (minus offshore) Federation Account 87
  - Federation Account allocation:
    - States receive 26.7 percent.
    - Local governments receive 20.6 percent.
  - VAT sharing:
    - Federal government 15 percent.
    - States 50 percent.
    - Local governments 35 percent.
  - Federal Account allocation formula (Annex Table 2.2, percent):
    - Equal Share 40
    - Population Size 30
    - Social Development Factors 10
    - Internal Revenue Effort 10
    - Landmass 5
    - Type of Terrain 5
- Expenditure assignments:
  - Federal: defense, foreign affairs, law and public order, railways, posts and communications, national roads, air and sea travel.
  - States: education, health, public works; principal responsibility for primary health and primary education.
  - Local governments: roles vary; often act as agents of state governments.
- Own revenue and volatility:
  - State own revenue: personal income tax, 13 percent of oil proceeds for oil-producing states, stamp duties, road taxes, business registration fees, lease fees.
  - Local own revenue: property tax, fees for motor parks and sewage collection.
  - Sharing of oil proceeds with producing states has caused large revenue swings and undermined equalization:
    - A 10 percent fall in oil price caused a 20 percent decline in federal oil revenues and a reduction by more than a third in oil-producing states; this volatility contributed to salary arrears and a partial federal bailout in 2015.
- Borrowing legal framework:
  - Fiscal Responsibility Act (2007): empowers president to set overall consolidated debt limits; limits public borrowing to capital projects; requires federal guarantee for external loans to states.
  - Investment and Securities Act (2007): state and local borrowing allowed only if loans outstanding do not exceed 50 percent of actual revenue for the preceding year.
  - National Debt Management Framework (2013–17): guidelines for contracting and reporting commercial debts by states and local governments.

### Cross-cutting conclusions and policy implications
- Most SSA countries remain highly centralized; only a handful have meaningful fiscal decentralization; subnational spending remains low relative to typical OECD levels.
- Determinants in SSA align with global experience: higher GDP per capita, higher population density, and greater ethnic fractionalization increase the likelihood of decentralization.
- Decentralization appears correlated with higher GDP per capita when institutions are stronger but does not appear to reduce income inequality in SSA.
- Macroeconomic risks have largely been contained in the few SSA countries that decentralized, but political pressures can cause pace and sequencing to outstrip subnational capacity.
- Recommended strategy:
  - Implement decentralization within a comprehensive legal and intergovernmental fiscal (PFM) framework.
  - Pace implementation gradually and align devolution with strengthening of subnational capacity, PFM systems, transparent transfer formulas, and hard budget constraints.

*Executive Summary and chapter excerpts from "Lessons for Effective Fiscal Decentralization in Sub-Saharan Africa" (IMF).*

### Executive Summary ������������������������������������������������������������������������������������������������������

### 45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa - Executive Summary

### Determinants and effectiveness
- Empirical results suggest that (1) the major driving forces behind fiscal decentralization in sub-Saharan Africa include efforts to defuse ethnic conflicts, the initial level of income, and the urbanization rate, whereas strength of democracy is not an important determinant for decentralization; and (2) decentralization in sub-Saharan Africa is associated with higher growth in the presence of stronger institutions.

### Spending assignments
- The allocation of spending across levels of government in the four case studies (Kenya, Nigeria, South Africa, Uganda) is broadly consistent with best practice.
- In Uganda, unlike in the other three case studies, subnational governments have little flexibility to make spending decisions as a result of a deconcentrated rather than a devolved system of government.

### Own revenue
- The assignment of taxing powers is broadly in line with best practice in the four case studies, with the bulk of subnational revenue coming from property taxes and from fees for local services.
- Own revenues are a very small fraction of subnational spending, reflecting weak cadaster systems and a high level of informality in the economy.

### Transfers
- In some cases (for example, Kenya and Nigeria) most transfers are unconditional, with subnational governments having broad spending autonomy.
- In most sub-Saharan African countries transfers are largely earmarked by the central government for the provision of specific services.

### Hard budget constraints and borrowing control
- The authorities in the four sub-Saharan Africa case studies have generally succeeded in keeping borrowing by subnational governments under control using strict fiscal rules, including ceilings on subnational governments’ debt stock (Kenya, Nigeria, Uganda) or tough sanctions for subnational governments if they ignore good fiscal practices instituted by the central government, complemented by a transparent mechanism for subnational bankruptcies (South Africa).

### Speed of transition and capacity
- The fast speed of fiscal decentralization in Kenya and South Africa has not been commensurate with the capacity of subnational governments to effectively carry out the spending assigned to them.
- Initial problems with service delivery at the subnational level were addressed gradually over time.
- This suggests a gradual decentralization through a process that goes hand in hand with strengthening the public finance management systems.

### Historical and regional context
- At independence, sub-Saharan African countries inherited a highly centralized model of territorial government and fiscal arrangements.
- Fiscal decentralization reforms started gaining momentum in sub-Saharan Africa in the early 1990s.
- Fiscal decentralization is most advanced in three sub-Saharan African countries—Ethiopia, Nigeria, and South Africa—where spending at the subnational government level represents about half of total general government spending.
- In Kenya, Rwanda, Tanzania, and Uganda subnational spending amounts to about 15–20 percent of general government spending.
- Subnational government spending in these countries is in line with the level in other emerging markets, although well below that in a typical Organization for Economic Co-operation and Development (OECD) country.

### Pros and cons (macroeconomic trade-offs)
- Pros
  - Better targeting and more resources for remote and rural areas (equity and redistribution).
  - Better information on local needs and preferences and more accountability (productive and allocative efficiency).
  - Potential to address perceived ethnic and political bias by giving local communities greater control over resources and decisions about service delivery, especially if accompanied by greater transparency and accountability.
- Cons / Risks
  - Macro-fiscal risks: higher fiscal deficits, less flexibility to respond to shocks; decentralization of spending often financed through a common pool of transfers can lead to overspending and lower tax effort at the subnational level.
  - Mismatch between spending responsibilities and ability to collect revenue can increase overall fiscal deficit and public debt.
  - Lower spending efficiency and higher nuisance taxes: weak administrative or technical capacity and typically higher corruption at the subnational levels may result in less efficient provision of local services; decentralization without adequate central resources can lead to nuisance taxes.
  - Political risks: devolution could undermine national unity by encouraging fragmentation along ethnic lines or by decentralizing corruption, enabling local elite capture.

### Evidence on service delivery, growth, and inequality
- Fiscal decentralization has an ambiguous impact on service delivery:
  - Barankay and Lockwood (2006) find educational attainment in OECD countries is positively and significantly correlated with the degree of decentralization.
  - Jimenez and Smith (2005) find infant mortality in Canadian provinces is negatively correlated with the degree of decentralization.
  - In sub-Saharan Africa, findings in Nigeria suggest that higher fiscal decentralization is associated with lower mortality and higher literacy rates (Akpan 2011).
  - Studies on convergence of service provision across regions suggest that if substantial equalization grants are not provided, decentralization actually increases regional disparities in service delivery.
  - The degree of fractionalization seems to adversely affect access to public services in ethnically diverse jurisdictions (for example, Ghana) (Aramov and Asante 2009).
- The impact of fiscal decentralization on growth is inconclusive:
  - Thiessen (2000, 2003) finds a bell-shaped curve for OECD countries: growth accelerates when countries move from low to medium levels of decentralization, but higher levels of decentralization reduce growth.
  - Gemmell, Kneller, and Sanz (2013) find that spending decentralization in 23 OECD countries was associated with lower economic growth, whereas revenue decentralization has been associated with higher growth.
  - The type of decentralization (spending versus revenue) can affect the impact on growth.

*Executive Summary from "Lessons for Effective Fiscal Decentralization in Sub-Saharan Africa" (IMF).*

### conclusion in a study covering 16 central and eastern European countries.

### LESSONS FOR EFFECTIVE FISCAL DECENTRALIZATION IN SUB-SAHARAN AFRICA

### Pros and cons of fiscal decentralization
- Decentralization of spending has been found to result in lower public investment, in part owing to larger public employment following decentralization, which tends to have an adverse impact on growth (Ahmad and Tanzi 2002).
- Using decentralization to alleviate ethnic rivalries has not always worked: local elections may catalyze the expression of divisive demands and exacerbate interregional and interethnic competition for central resources; such problems have tended to become acute in countries with regionally concentrated reserves of natural resources (Brosio 2000).
- Evidence from sub-Saharan Africa suggests decentralization has increased the share of resources directed to poorer regions in some cases (South Africa regarding expenditure on education; Ethiopia, where centrally provided transfers have benefited the poorest regions), although the impact on educational outcomes has been uneven (Ahmad and Tanzi 2002).
- Conflicting empirical results reflect diversity in experiences and the political legitimacy and effectiveness of governments undertaking decentralization.
- The benefits of decentralization are more likely under a devolved system than under a deconcentrated system; impacts also depend on whether powers are given to large units (states in federal countries) or much smaller ones (local governments in unitary states).
- Experience suggests gradual decentralization is better than a big-bang approach, but it is important that all the pieces of fiscal decentralization are in the plan from the beginning (Bahl and Bird 2018).

### Need for a comprehensive framework
- Decentralization must be implemented as part of a comprehensive intergovernmental fiscal framework; isolated changes (for example, modifying expenditure mandates, introducing new revenue-sharing schemes, or changing the transfer system) can create inconsistencies across government levels and increase macroeconomic risks (Fedelino and Ter-Minassian 2009; Goerl and Seiferling 2014).
- Decentralization design must be tailored to priority goals and country circumstances (Prud’Home 2003).
- Four essential elements for an effective framework:
  - (1) clarifying spending responsibilities across levels of government;
  - (2) allowing subnational government to raise own revenues to reduce vertical imbalances and increase fiscal responsibility;
  - (3) designing a transfer system that encourages subnational governments to collect own revenue and manage their functions efficiently;
  - (4) imposing hard budget constraints on subnational governments to foster fiscal discipline (Ter-Minassian 1997; IMF 2009a and 2009b).

### Assignment of responsibilities
- Few clear-cut rules exist for assigning spending responsibilities; some functions are straightforward (defense and foreign affairs to the central government; garbage collection and street cleaning to subnational governments), while many functions overlap and are jointly undertaken.
- Lack of clarity in spending assignments contributes to inefficient provision or underprovision of public services; example: separation of maintenance (subnational) and capital investment (central) often reduces both maintenance and capital expenditure.
- Failure to identify appropriate resources for assigned responsibilities can lead to fiscal pressures:
  - In some cases (Brazil and China) devolution of resources outpaced that of spending, creating central government pressures.
  - In transition economies in Eastern and Central Europe in the early 1990s, spending mandates pushed down without adequate resources led to debt, arrears, or deterioration in service quality.
- Recommendation: fiscal decentralization reform should include legislative clarification of responsibilities and identification of appropriate financing resources; best practice is to specify assignments in law (budget law or subnational budget law) rather than in the constitution to allow needed flexibility.

### Asymmetric decentralization
- Asymmetric decentralization can be used where strong cultural or linguistic differences exist or where capacities differ across subnational governments.
  - Cultural and linguistic differences: some European countries (Belgium, Italy, Spain) have given certain regions more spending responsibilities because of strong historical, cultural, or linguistic identity (Ahmad and Tanzi 2002).
  - Different local capacity: devolution can be staged by devolving functions first to local governments with sound institutions and sufficient capacity (Macedonia in the 1990s) or by giving more autonomy to urban centers (Bangladesh, Brazil, India) (Bahl and Bird 2018).
- Operationalizing asymmetric devolution: make devolution subject to compliance with minimum public finance management (PFM) requirements.

### Own revenues
- Allowing subnational governments revenue-raising powers may increase fiscal responsibility because increased spending would require increased taxation and downward accountability.
- Own-source revenues support diversity in service provision compared with heavy reliance on transfers, which may carry central conditions and preferences (Bahl and Bird 2008).
- A “good” local tax has an immobile base and a stable and predictable yield; examples: property taxes, personal income taxes, and user fees for local services. Indirect taxes such as VAT or corporate income tax are not appropriate as local taxes (Escolano and others in IMF 2015).
- Yield from subnational taxes and fees is very limited in low income countries (LICs):
  - Property tax requires effective cadaster systems, which are lacking in most LICs outside main cities.
  - Yields from other fees are low due to high informality.
  - When major social expenditure is liberalized, own-source revenue is usually insufficient (Ahmad and Tanzi, 2002).
  - Own revenue in sub-Saharan African countries with significant fiscal decentralization ranges from about 5 percent in Uganda to about 30 percent in Ethiopia.
  - GFS-based evidence suggests own revenue at the subnational level in low-income and developing countries is, on average, about 20 percent of general government revenue; in South East Europe the share of subnational revenue is broadly similar, amounting to about 16 percent, on average, of total general government revenue (NALAS 2016).
- Allowing unconstrained subnational taxation can lead to proliferation of low-yielding "nuisance taxes" with high compliance and administration costs, undermining the business environment.
- Recommendation: adopt national laws or a “closed list” of allowable revenue sources for subnational governments; best practice is for the central government to determine or set guidelines on bases and rates of local taxes.

*Source: conclusion in a study covering 16 central and eastern European countries.*

### Box 1. Criteria for “Good” Local Taxes

### Box 1. Criteria for “Good” Local Taxes

### Criteria for good local taxes
- The tax base should be relatively immobile, to allow local authorities some leeway to vary rates without losing much of their tax base.
- The tax yield should be relatively stable and predictable over time.
- It should not be possible to export much, if any, of the tax burden to nonresidents.
- The tax base should be visible, to ensure accountability.
- The tax should be perceived to be reasonably fair by taxpayers.
- The tax should be relatively easy to administer efficiently and effectively.

### Natural resource revenues
- Natural resource revenues are not suitable for sharing with subnational governments.
- Allowing producing regions to keep their natural resource revenues tends to contribute to significant fluctuations in the provision of public services in these regions, given the relatively volatile prices for natural resources (especially oil), and to exacerbate regional imbalances.
- Political realities might dictate some form of regional taxation or tax sharing on natural resources.
- Some sharing of natural resource revenue with subnational governments may make sense to compensate them for the costs associated with building infrastructure to enable the extraction of natural resources and for related environmental damage.

### Transfers to subnational governments
- Transfers to subnational governments from the center are inevitable, even in countries with modest fiscal decentralization.
- In most countries, spending decentralization has outpaced revenue decentralization over the past 20 years.
- In the OECD, own revenue covers on average just over half of subnational government spending, requiring significant transfers from the center.
- The required amount of transfers in sub-Saharan Africa ranges from about 75 percent of subnational spending in Ethiopia to about 95 percent in Uganda.
- Main lesson: resources should be made available to subnational governments at the same rate as the assignment of spending responsibilities.
- Countries should first assign spending responsibilities to the subnational governments and then design an appropriate transfer system.

Principles for designing transfer systems:
- Establish a transparent formula based on indicators outside the control of subnational governments:
  - Best practice is setting earmarked grants on minimum standards and setting equalization grants on objective criteria (for example, population, surface area, and relative income and poverty levels).
  - Indicators included in the formula should not reflect discretionary policy choices by the recipient subnational government.
- Ensure that transfers remain relatively stable to help subnational governments plan their budgets:
  - Good practice is to set transfers as a fixed proportion of central revenue in the context of a multiyear fiscal framework to enable long-term planning, especially for capital spending.
  - It is better to base transfers on overall central revenue than on particular taxes.
- Align incentives:
  - Design the transfer system to encourage subnational governments to collect own revenue and manage their functions efficiently.
  - Transfers should fill the gap between expenditure needs and the revenue potential for each subnational government.
  - This requires setting the amount of transfers for each subnational government ex ante during the budget process; ex post gap-filling transfers contribute to weak fiscal discipline.
- Flexibility in the design of transfers can be useful:
  - Enshrining the main principles of a transfer system in the constitution can help ensure stability in the amount of transfers; however, change is inevitable.
  - Several countries have set the formula for the transfer system in legislation, while providing for a periodic reassessment of the main parameters determining the amount of transfers to subnational governments; for example, the constitutions of South Africa and India require quinquennial assessments by dedicated finance commissions.

### Hard budget constraints on subnational governments
- Options to control subnational borrowing range from market discipline to administrative controls.
- Sole reliance on market discipline is often not sufficient unless strict conditions are met: open capital markets, adequate information, responsiveness of the borrower to market signals, and a strict no-bailout policy by the central government.
- Adoption of fiscal responsibility laws or limits on the debt and debt service burden of subnational governments helps foster fiscal discipline.
- Examples of rules:
  - Legislated debt thresholds that mimic market discipline.
  - A “golden rule” allowing borrowing only to finance capital spending.
- Risks and circumvention:
  - Golden rules may create incentives to reclassify current spending as capital spending.
  - Dipping into pension funds and using subnational corporations to borrow on behalf of the subnational government are other ways to bypass debt limits.
- Insolvency mechanisms for subnational governments can help align incentives and complement borrowing limits.
- Enforcement is essential:
  - Legislative limits or administrative controls must be enforced; penalties for exceeding legislative debt limits can be useful.
  - Some countries impose administrative sanctions on officials who violate the rules (withholding salaries, criminal penalties, fines), while others impose sanctions on subnational governments that miss fiscal targets (for example, Germany suspends consolidation payments to states that miss their fiscal targets).
  - Transparent mechanisms for enforcing bankruptcies of subnational governments (as in South Africa) help mitigate moral hazard risk.

### Accountability and information
- A strong accountability framework supports the effectiveness of fiscal decentralization and helps enforce fiscal rules.
- Regular collection, analysis, and reporting of information on fiscal operations are critical to verify compliance with policy goals and to strengthen citizen oversight.

### Trends, determinants, and effectiveness in sub-Saharan Africa
- Fiscal decentralization in sub-Saharan Africa is much less common than in advanced and emerging market economies.
- Most sub-Saharan African countries remain centralized, with very limited spending autonomy for subnational governments.
- The decentralization of revenue is comparatively much lower than that of expenditure.
- Determinants found in the literature include population density, country size, share of urban population, income level, degree of ethnic fractionalization, and level of democracy.
- An empirical analysis suggests:
  - The probability for a sub-Saharan African country to decentralize increases with the initial values of GDP per capita and the degree of ethnic fractionalization, and decreases as the share of population living in urban areas rises.
  - The strength of democracy (as measured by the polity index) does not seem to be an important determinant for decentralization in sub-Saharan Africa.
  - Population density is statistically significant in only one out of four specifications.
- Effectiveness:
  - Fiscal decentralization in sub-Saharan Africa seems to be positively correlated with better growth performance in the presence of better institutions.
  - Decentralization does not seem to be correlated with better income distribution.
  - An OLS analysis suggests decentralization is positively correlated with higher growth when interacted with the quality of institutions.
  - Higher GDP per capita is positively correlated with lower income inequality.
  - A higher level of urbanization seems to be correlated with lower inequality and higher growth.

*Box 1. Criteria for “Good” Local Taxes.*

### Box 2. Likely Determinants of Fiscal Decentralization in Sub-Saharan Africa

### Box 2. Likely Determinants of Fiscal Decentralization in Sub-Saharan Africa

### Logit analysis of determinants
- Dependent (binary) variable: decentralization = 1 if the share of subnational spending is at least 5 percent of total government spending, and 0 otherwise.
- Sample: 39 sub-Saharan African countries; seven countries cross the 5 percent threshold: Ethiopia, Kenya, Nigeria, Rwanda, South Africa, Tanzania, Uganda.
- Predictor variables included: GDP per capita, population density, share of urban population, polity index, degree of ethnic fractionalization. Geographic size and a dummy for resource-rich countries were not significant and are not reported.
- Degree of ethnic fractionalization measured as a Herfindahl concentration index of ethnic groups.

- Table 2.1 (logit marginal effects; explanatory variables set equal to their median values):
  - Specification (1)
    - GDP per capita (log): 0.37* (0.16)
    - Population density (log): 0.16* (0.08)
    - Urban Population (%): 20.025* (20.01)
    - Polity index: 20.0091 (20.02)
    - Number of Countries: 39
    - Predicted probability: 0.2
    - Pseudo R-squared: 0.33
  - Specification (2)
    - GDP per capita (log): 0.21* (0.1)
    - Population density (log): 0.083 (0.06)
    - Urban Population (%): 20.014** (20.01)
    - Polity index: 20.012 (20.02)
    - Number of Countries: 38
    - Predicted probability: 0.15
    - Pseudo R-squared: 0.37
  - Specification (3)
    - GDP per capita (log): 0.31** (0.12)
    - Population density (log): 0.14 (0.09)
    - Urban Population (%): 20.023** (20.01)
    - Polity index: 20.0095 (20.02)
    - Ethnic-SM: 1.33* (0.55)
    - Number of Countries: 38
    - Predicted probability: 0.2
    - Pseudo R-squared: 0.34
  - Specification (4)
    - GDP per capita (log): 0.32* (0.13)
    - Population density (log): 0.16 (0.1)
    - Urban Population (%): 20.025** (20.01)
    - Polity index: 20.012 (20.02)
    - Ethnic-Roeder: 1.20* (0.57)
    - Number of Countries: 38
    - Predicted probability: 0.15
    - Pseudo R-squared: 0.42

- Note: Robust standard errors in parentheses. Significance markers: *p , .05, ** p, .01, ***p , .001.

### Empirical findings on determinants
- The decision to decentralize increases with:
  - initial values of GDP per capita,
  - population density,
  - degree of ethnic fractionalization.
- Polity index (measure of democracy) and geographic size were not robust predictors in reported specifications.
- Predicted probability of being decentralized across specifications ranges: 0.15 to 0.2.

### Accountability, governance, and capacity
- The most fiscally decentralized SSA countries tend to have better overall government effectiveness indicators.
- A strong accountability framework is key to:
  - enabling central monitoring and evaluation of local performance,
  - enforcing fiscal rules on subnational governments,
  - improving local service delivery.
- Where governance quality and subnational capacity are weak (examples: Madagascar, Mali), a gradual approach to assigning responsibilities and financing is suggested, aligned with strengthening subnational capacity and PFM systems.

### Lessons from four case studies (Kenya, Nigeria, South Africa, Uganda)
- Common drivers:
  - Fiscal decentralization in these countries was driven mainly by efforts to defuse ethnic conflicts and reduce regional/ethnic tensions.
- Pace and sequencing:
  - Rapid/big-bang decentralization (Kenya, South Africa) created challenges in containing spending and maintaining service delivery due to limited subnational capacity.
  - Kenya experienced an increase in recurrent spending of about 2 percent of GDP compared with the pre-devolution period.
  - Initial problems have been mitigated over time through measures such as monthly reporting, national treasury support for realistic budgets, multiyear budget frameworks, and benchmarking.
- Division of functions:
  - National level: policy, standard setting, national public goods (e.g., national security, macroeconomic policy).
  - Subnational level: policy implementation and local service delivery (health, water, local roads, most agriculture extension services, primary education—except Kenya where subnational governments provide only preschool education).
- Authority over spending:
  - Kenya, Nigeria, South Africa: subnational governments have broad authority for spending financed by own revenue and unconditional grants (devolution).
  - Uganda: subnational governments have little flexibility; transfers largely earmarked and deconcentrated system with upward accountability to central government.

### Fiscal instruments, transfers, and borrowing (case-study specifics)
- Own revenues (share of subnational spending from own revenues):
  - Uganda: about 5 percent
  - Kenya: about 10 percent
  - Nigeria: about 15 percent
  - South Africa: about 20 percent
- Transfer system:
  - Kenya, Nigeria, South Africa: transfers mostly unconditional and based on transparent formulas with strong redistribution elements (population and income); Kenya and South Africa review formulas every five years.
  - Uganda: transfers largely conditional/earmarked; formula is complex with separate formulas for some 38 conditional grants, undermining transparency.
- Subnational borrowing limits and rules:
  - Kenya: PFM law limits counties’ stock of debt and debt service to 20 percent and 15 percent, respectively, of the county’s revenue in the preceding year; long-term borrowing subject to central government approval and guarantee.
  - Nigeria: borrowing limited for capital projects and not allowed if the state is in arrears; external loans require central government guarantee; stock of debt cap may not exceed 50 percent of last year’s revenue.
  - South Africa: stock of debt may not exceed 50 percent of last year’s revenue; central government guarantees for municipal borrowing prohibited; legislation allows provincial and local borrowing for capital and bridging only.
  - Uganda: borrowing allowed but subject to a cap (25 percent of locally generated revenue) and requires central government approval.
- Fiscal rules observed:
  - All four countries limit long-term borrowing by subnational governments to financing development projects (golden rule) and short-term borrowing to liquidity management.
  - Where central government guarantees exist (Kenya, Nigeria), approval is required; South Africa prohibits central guarantees and uses transparent bankruptcy mechanisms and sanctions to enforce no-bailout commitment.

### Specific risks and country experiences
- Nigeria: sharing of oil proceeds with oil-producing states causes large revenue swings; a 10 percent fall in oil price caused a 20 percent decline in federal oil revenues but a reduction by more than a third in oil-producing states, contributing to large salary arrears in 2015 and a partial federal bailout to 23 states.
- South Africa: demonstrated that decentralization benefits require simultaneous budget process reform—capacity, information, financial management, benchmarking, GFS classification, accounting standards, and chart of accounts reforms were implemented to support decentralization.
- Kenya: devolution transferred substantial powers and resources (to about 5 percent of GDP beginning in 2013/14 from less than 1 percent previously) to 47 new counties; the big-bang rollout (one year instead of a planned three years) led to service delivery challenges and an increase in recurrent spending by about 2 percent of GDP; prudent borrowing ceilings for counties (20 percent and 15 percent of the previous year’s audited revenue for stock and debt service, respectively) helped keep borrowing under control.

### Overall conclusions and policy implications
- Most SSA countries retain highly centralized territorial and fiscal arrangements; only a handful have meaningful fiscal decentralization and subnational spending remains low relative to typical OECD levels.
- Determinants of decentralization in SSA align with global experience: higher GDP per capita, higher population density, and greater ethnic fractionalization increase the likelihood of decentralization.
- Decentralization correlated with higher GDP per capita in the presence of better institutions, but it does not appear to reduce income inequality in SSA.
- Macroeconomic risks from decentralization have largely been contained in the few SSA countries that decentralize, though political pressures can result in faster decentralization than subnational capacity warrants.
- Strategy recommendation (illustrated by Kenya): implement decentralization within a comprehensive legal and PFM framework and pace implementation gradually in line with subnational capacity.

*Source: Box 2. Likely Determinants of Fiscal Decentralization in Sub-Saharan Africa (excerpt).*

### Conclusions

### Conclusions

### Cross-cutting findings from the four case studies
- The analysis encompasses spending assignments, own revenue, the transfer system, and subnational borrowing.
- Spending assignments and fiscal autonomy of subnational governments:
  - The division of the spending function across levels of government in the four case studies is broadly consistent with best practice, although there are differences in spending powers.
  - In Uganda subnational governments have little flexibility to make spending decisions as a result of an effectively deconcentrated rather than a devolved system of government.
  - In the other three countries, the subnational governments have broad spending autonomy, reflecting a political rather than merely administrative decentralization.
- Own revenue:
  - The assignment of taxing powers in the four case studies is also broadly in line with best practice, with the bulk of subnational revenue coming from property taxes and fees for local services.
  - Own revenues are a very small fraction of subnational spending, reflecting weak cadaster systems and a high level of economic informality.
  - In Nigeria, the sharing of oil revenue with oil-producing states has undermined the regional income equalization objective and exposed the oil-producing states to large swings in revenue.
- Transfers:
  - In three of the four case studies (Kenya, Nigeria, South Africa) most transfers are unconditional and based on transparent formulas with strong redistributive elements. In these countries, the subnational governments have broad spending autonomy.
  - In Uganda, the transfers are largely conditional; that is, earmarked by the center for the provision of specific services, leaving little autonomy to the subnational governments.
- Hard budget constraints:
  - Governments in the four case studies have succeeded in keeping borrowing by subnational governments under control.
  - This reflects strict fiscal rules aimed at preventing excessive borrowing by subnational governments, including ceilings on debt stock (Kenya, Nigeria, Uganda) or a transparent mechanism for public bankruptcies complemented by tough sanctions if subnational governments ignore good fiscal practices (South Africa).

### Policy implication: Pace and sequencing of decentralization
- Given generally weak PFM systems in sub-Saharan Africa, countries that decide to proceed with fiscal decentralization should do so in phases.
- The big-bang approach to decentralization has in some cases resulted in excessive accumulation of debt at the subnational level (example cited: abrupt decentralization in a number of Latin American countries in the 1980s and 1990s).
- While the rapid pace of fiscal decentralization in some sub-Saharan African countries (for example, Kenya and South Africa) has not been accompanied by excessive borrowing at the subnational level, it has created challenges:
  - Controlling current spending, creating fiscal pressure at the center.
  - Ensuring service delivery, as subnational governments lacked capacity for budgeting or for monitoring and reporting fiscal developments.
- Recommendation:
  - In light of the relatively weak quality of governance in some sub-Saharan African countries planning fiscal decentralization reforms, a gradual approach would seem appropriate and consistent with the pace of strengthening the PFM systems at the subnational level.

### Case Study: Kenya — key findings and figures
- Background and institutional changes:
  - Kenya is a very diverse country, with 10 major and more than 30 minor ethnic groups.
  - At independence in 1963 Kenya inherited a system of self-governing local authorities; over time their role weakened (Transfer of Functions Act in 1969).
  - Following adoption of a new constitution in September 2010 Kenya launched a major devolution defining the public sector as comprising two levels of government: a national government and 47 elected county governments (which replaced some 175 local governments).
  - County officials are elected every five years.
  - Funding for the counties is coordinated by the Intergovernmental Budget and Economic Council, which is chaired by the vice president and consists of 47 county finance ministers plus the cabinet secretary for the national treasury and some key independent commissions.
- Expenditure assignments:
  - The national level focuses on policy and standard setting and public goods; county-level functions focus on policy implementation and local service delivery in four key sectors (health, agriculture, transport, and water).
  - Counties are responsible for all personnel engaged in these functions.
  - In education, only preprimary education has so far been devolved.
  - Kenya took a big-bang approach to the devolution of spending to counties:
    - The Transition Authority approved the transfer of almost all functions to counties in one go, which quadrupled spending at the county level within one year.
    - The transition was marred by inconsistency, poor understanding of the system, management challenges, and lack of coordination between the national and county governments.
- Fiscal impact and service delivery:
  - The rapid pace of devolution contributed to a significant increase in overall government spending and created challenges for service delivery.
  - Total spending in the year devolution was rolled out increased by about 2 percent of GDP compared with the pre-devolution period, putting pressure on fiscal balances.
  - Service delivery issues (especially in the health sector) included delays in salary payments; these issues have largely been addressed with evidence of improved indicators in services provided by counties (gross enrollment in preprimary education, student enrollment in youth polytechnics, births registered in health facilities, and access to maternal health care).
  - Frequent expenditure reallocations persist, suggesting challenges in prioritizing expenditures and constructing reliable forward estimates within a sustainable fiscal framework.
- Containing current spending in counties:
  - Subnational governments are required to allocate 30 percent of their budgets for development spending.
  - Development spending averaged about 35–40 percent during fiscal years 2013/14–15/16.
  - About a third of the counties missed the 30 percent development target in 2015/16.
  - Wage spending amounted to about 40 percent of county spending in 2015/16, an increase of about 15 percent from the previous year (a nearly double-digit increase in real terms).
  - High wage bills reflect inherited staff, new recruitment (sometimes above recommended pay scales), and high wage increases for county assembly members and support staff.
- Own revenue:
  - Constitutional assignment: only the central government can impose income taxes, value added taxes, custom duties, and excises. County governments are assigned the property tax, entertainment tax, and trade licensing fees.
  - The Public Finance Management Act of 2012 allows county governments to collect fees for the services they provide.
  - Weak collection of county own revenues has contributed to higher rates for taxes and fees.
  - Own revenue currently amounts to only about 0.5 percent of GDP, which is equivalent to about 10 percent of total spending by counties.
  - Own revenue in Nairobi and Mombasa is about 50 percent and 35 percent of their respective total spending, but it is below 15 percent in most other counties.
  - Property taxes have potential but cadastral information is weak, valuation rolls incomplete and out of date, and land often untitled in rural counties.
  - Some counties have imposed higher rates for taxes and fees (example: Nairobi raised fees for business permits, hygiene, parking, transport, building permits, advertising on billboards).
- Transfers:
  - The constitution requires that counties receive no less than 15.5 percent of the previous year’s central government’s audited revenue.
  - Of these, 15 percentage points should be in the form of unconditional transfers.
  - The remaining 0.5 percentage points are to be transferred into the Equalization Fund, used to provide basic services including water, roads, health facilities, and electricity to marginalized areas.
  - For the first four years of operation—2013/14 through 2016/17—the transfers to counties were much higher than the minimum required under the constitution (over 20 percent of the previous year’s audited revenues).
  - The formula for allocating unconditional transfers among counties is transparent and highly equitable; the share of equitable transfers varies from about half of spending in Nairobi County to as much as 95 percent in the poorest counties.
  - The constitution stipulates that the formula for the equitable share transfers be reviewed by Parliament every five years.
- Borrowing:
  - The 2010 constitution states that borrowing by counties (except for short-term borrowing for liquidity management) requires government guarantees and is limited to financing development projects (the golden rule).
  - The 2015 amendments to PFM regulations establish limits on both the stock of gross debt and debt service for counties (up to 20 percent and 15 percent, respectively, of the county’s last audited revenues); require annual publication of county financial accounts; and specify financial and criminal penalties for violation of PFM regulations.
- Annex: Kenya formula for transfers to counties (percent of total)
  - Population: 45 percent (2012/13–15/16 and 2016/17–18/19)
  - Equal share: 25 percent (2012/13–15/16 and 2016/17–18/19)
  - Poverty level: 20 percent (2012/13–15/16); 18 percent (2016/17–18/19)
  - Land area: 8 percent (2012/13–15/16 and 2016/17–18/19)
  - Fiscal effort: 2 percent (2012/13–15/16); 1 percent (2016/17–18/19)
  - Development needs: — (2012/13–15/16); 1 percent (2016/17–18/19)
  - Personal emoluments: — (2012/13–15/16); 2 percent (2016/17–18/19)

### Case Study: Nigeria — selected findings on assignments and own revenue
- Institutional evolution:
  - Nigeria became a federal state in 1967 when four regions were divided into 12 states and three levels of government were established: federal, state, and local.
  - The number of states increased over time to the current level of 36 (plus the federal capital) in 1996.
- Intergovernmental tensions:
  - Relations have been characterized by occasional tensions between oil-producing states and non-oil-producing states over sharing oil revenue.
  - The Biafra War (1966–70) broke out over disagreement on how to share oil revenue.
  - Over time the share of oil revenue going to the oil-producing states has declined, from 50 percent right after independence to 13 percent now.
- Expenditure assignments:
  - The federal government is responsible for defense, foreign affairs, law and public order, railways, posts and communications, national roads, and air and sea travel.
  - States provide education, health, and public works; local governments’ roles vary widely and often act as agents of state governments.
  - State governments have principal responsibility for basic services such as primary health and primary education.
  - The federal government retains responsibility for public goods such as immunization and communicable diseases.
- Own revenue and revenue sharing:
  - State own revenues include the personal income tax, 13 percent of oil proceeds for oil-producing states, stamp duties, road taxes, business registration fees, and lease fees for state lands.
  - Local government own revenues include the property tax and fees for motor parks and sewage collection.
  - Except for the VAT, the rates and bases of other local taxes and fees are set by the local government or by the respective state.
  - For the VAT, half of the VAT allocation is distributed according to population, 30 percent in equal amounts for all governments, and 20 percent on the basis of the actual collection in each jurisdiction.
  - The sharing of oil proceeds with oil-producing states has exposed these states to large swings in revenue and undermined regional income equalization:
    - Ahmad and Singh (2003) find that a 10 percent fall in the oil price caused a 20 percent decline in federal oil revenues but a reduction by more than a third in oil-producing states.
    - This volatility interfered with budgeting in oil-producing states and required a partial bailout in 2015.

*Conclusions (chapter content).*

### Annex Table 2.1. Nigeria: Federal-State Shares of Oil Proceeds from

### Annex Table 2.1. Nigeria: Federal-State Shares of Oil Proceeds from Distributable Pool

### Federal-State shares (table values)
- Annex Table 2.1 (in percent):
  - 1960–69: Producing State 50 Federation Account 50
  - 1969–71: Producing State 45 Federation Account 55
  - 1971–75: Producing State 45 (minus offshore) 55 (plus offshore)
  - 1975–79: Producing State 20 (minus offshore) 80 (plus offshore)
  - 1979–81: Producing State — Federation Account 100
  - 1982–92: Producing State 1.5 Federation Account 98.5
  - 1992–99: Producing State 3 Federation Account 97
  - 1999–Current: Producing State 13 (minus offshore) Federation Account 87

### Transfers (federal transfers and VAT sharing)
- Federation Account financing sources:
  - Oil revenues, proceeds of corporate income tax, custom duties, and excise taxes.
- Allocation shares of Federation Account deposits:
  - States receive 26.7 percent.
  - Local governments receive 20.6 percent.
- VAT revenue sharing:
  - Federal government 15 percent.
  - States 50 percent.
  - Local governments 35 percent.
- Actual allocation to each state and local government is determined by the formula specified in Annex Table 2.2.

### Annex Table 2.2. Nigeria: Formula for Federal Account Allocation to States and Local Governments
- Indicator (Percent):
  - Equal Share 40
  - Population Size 30
  - Social Development Factors 10
  - Internal Revenue Effort 10
  - Landmass 5
  - Type of Terrain 5

### Borrowing (legal framework and constraints)
- Main borrowing rules set in:
  - Fiscal Responsibility Act (2007)
  - Investment and Securities Act (2007)
  - National Debt Management Framework agreement for 2013–17
- Fiscal Responsibility Act provisions:
  - (1) Empowers the president, subject to approval by the National Assembly, to set overall limits on consolidated debt of the federal and state governments (these limits are proposed by the Federal Debt Management Office as part of the annual budget exercise).
  - (2) Limits public borrowing to capital projects, with no tier of government allowed to borrow if it is in arrears in debt service.
  - (3) Requires that any state government or its agencies may obtain external loans only through the federal government and that such loans must be supported by a federal government guarantee approved by the National Assembly.
- Investment and Securities Act provision:
  - Allows state and local government borrowing only if the total amount of loans outstanding at any particular time, including the proposed loan, does not exceed 50 percent of actual revenue for the preceding year.
- National Debt Management Framework agreement for 2013–17:
  - Sets guidelines for contracting and reporting commercial debts by the states and local governments.

*Source: Akujuru 2015.*

### References

### 45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa - References

### References

- Ahmad, E., G. Brosio, and M. Gonzalez. 2006. “Uganda: Managing More Effective Decentralization.” IMF Working Paper 06/279, International Monetary Fund, Washington, DC.
- Ahmad, E., G. Brosio, and V. Tanzi. 2008. “Local Service Provision in Selected OECD Countries: Do Decentralized Operations Work Better?” IMF Working Paper 08/67, International Monetary Fund, Washington, DC.
- Ahmad, E., and B. Searle. 2005. “On the Implementation of Transfers to Subnational Governments.” IMF Working Paper 05/130, International Monetary Fund, Washington, DC.
- Ahmad, E., and R. Singh. 2003. “Political Economy of Oil-Revenue Sharing in a Developing Country: Illustrations from Nigeria.” IMF Working Paper 03/16, International Monetary Fund, Washington, DC.
- Ahmad, E., and V. Tanzi. 2002. Managing Fiscal Decentralization. London: Routledge.
- Akeem, U. 2011. “Revenue Allocation Formula and its Impact on Economic Growth Process in Nigeria.” Journal of Economics and Sustainable Development, Vol. 2, No. 3, pp. 29–37
- Akpan, E. 2011. “Fiscal Decentralization and Social Outcomes in Nigeria.” European Journal of Business and Management 3 (4): pp. 167–183.
- Akujuru, C. 2015. “Revenue Allocation in Nigeria and the Dependency on Oil Revenue: The Need for Alternative Solutions.” Global Journal of Arts, Humanities, and Social Sciences 3 (2): pp. 19–36.
- Aldasoro, I., and M. Seiferling. 2014. “Vertical Imbalances and the Accumulation of Government Debt.” IMF Working Paper 14/209, International Monetary Fund, Washington, DC.
- Aramov, K., and F. Asante. 2009. “Decentralization and Local Public Services in Ghana: Do Geography and Ethnic Diversity Matter?” Discussion Paper 00872, International Food Policy Research Institute, Washington DC.
- Bahl, R., and R.M. Bird. 2008. “Subnational Taxes in Developing Countries: The Way Forward,” Public Budgeting and Finance, Winter 2008, Vol. 28, Issue 4, pp. 1–25.
- Bahl, R., and R.M. Bird. 2018. “Fiscal Decentralization and Local Finance in Developing Countries.” Edward Elgar Publishing, Massachusetts, USA.
- Barankay, I. and B. Lockwood, 2006, “Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons,” IZA Discussion Papers N. 2477, Institute for the Study of Labour (IZA).
- Bodman, P., and others, 2009. What Drives Fiscal Decentralization? University of Queensland, St. Lucia, Australia.
- Brosio, G., 2000, “Decentralization in Africa,” mimeo.
- Cabrero Mendoza E, and J. Martinez-Vazquez, 2000, ’’Assignment of spending responsibilities and service delivery’’, in Achievements and Challenges of Fiscal Decentralization: Lessons from Mexico Eds M Giugale, S Webb (World Bank,Washington, DC), pp. 139–176.
- Dziobek, C., M.C. Gutierrez, and P. Kufa. 2011. “Measuring Fiscal Decentralization––Exploring the IMF’s Databases.” IMF Working Paper 11/126, International Monetary Fund, Washington, DC.
- Economist Intelligence Unit, “County-level taxes push up business costs,” February 25th 2014.
- Escolano, J., and others 2012. “Fiscal Performance, Institutional Design and Decentralization in European Union Countries.” IMF Working Paper 12/45, International Monetary Fund, Washington, DC.
- Eyraud, L., and L. Lusinyan. 2011. “Decentralizing Spending More than Revenue: Does It Hurt Fiscal Performance?” IMF Working Paper 11/226, International Monetary Fund, Washington, DC.
- Eyraud, L., and L. Lusinyan. 2013. “Vertical Imbalances and Fiscal Performance in Advanced Economies.” Journal of Monetary Economics 60 (5): pp. 571–87.
- Fedelino, A. 2010. Making Fiscal Decentralization Work: Cross-Country Experiences. IMF Occasional Paper 271. Washington, DC: International Monetary Fund.
- Fedelino, A., and T. Ter-Minassian. 2009. Macro Policy Lessons for a Sound Design of Fiscal Decentralization. Washington, DC: International Monetary Fund.
- Gemmell, N., R. Kneller, and I. Sanz. 2013. “Fiscal Decentralization and Economic Growth in OECD Countries: Spending versus Revenue Decentralization.” Economic Inquiry 51: pp. 1915–31.
- Golola, M. 2001. “Reforms, Rural Bureaucracies and Services Delivery in Uganda.” Paper for Wider Project Meeting on ’Institutional Capabilities, Reform Ownership and Development in SSA’, 4–5 May 2001, Helsinki, Finland.
- Goerl, C., and M. Seiferling. 2015. “Income Inequality, Fiscal Decentralization, and Transfer Dependency.” IMF Working Paper 14/64, International Monetary Fund, Washington, DC.
- International Monetary Fund (IMF). 2006. Regional Economic Outlook: Sub-Saharan Africa—Fiscal Decentralization. Washington, DC.
- International Monetary Fund (IMF). 2009a. “Macro Policy Lessons for a Sound Design of Fiscal Decentralization.” Washington, DC: International Monetary Fund (https:// www .imf .org/ external/ np/ pp/ eng/ 2009/ 072709 .pdf).
- International Monetary Fund (IMF). 2009b. “Macro Policy Lessons for a Sound Design of Fiscal Decentralization—Background Studies.” Washington, DC: International Monetary Fund (http:// www .imf .org/ ~/ media/ websites/ imf/ imported -full -text -pdf/ external/ np/ pp/ eng/ 2009/ _072709a .ashx).
- International Monetary Fund (IMF). 2016 Article IV Consultation with Nigeria, IMF Country Report No. 16/101.
- Jimenez-Rubio, D., and P. Smith, 2005, “Decentralization of Health Care and its Impact on Health Outcomes,” Discussion Papers, Department of Economics, University of York.
- Kjaer, A. 2004. “Old Brooms Can Sweep Too!: An Overview of Rulers and Public Sector Reforms in Uganda, Tanzania, and Kenya,” Journal of Modern African Studies, Vol. 42, No. 3, pp. 389–413.
- Kotia, A., and V. Lledó. 2016. “Do Subnational Rules Foster Fiscal Discipline? New Empirical Evidence from Europe.” IMF Working Paper 16/84, International Monetary Fund, Washington, DC.
- Langseth, P. 1995. “Civil Service Reform in Uganda: Lessons Learned,” Public Administration and Development, Vol. 15 (October): pp. 365–90.
- Liu, L., and M. Waibel. 2008. “Subnational Insolvency: Cross-Country Experiences and Lessons.” World Bank Policy Research Working Paper 4496, World Bank, Washington, DC.
- Momoniat, Ismail. 2002. “Fiscal Decentralization in South Africa: A Practitioner’s Perspective” (in Ahmad, E., and V. Tanzi. 2002. Managing Fiscal Decentralization. London: Routledge).
- Musgrave, R.A. 1959. The Theory of Public Finance: A Study in Public Economy. New York: McGraw-Hill.
- Network of Associations of Local Authorities in South-East Europe (NALAS). 2017. “Fiscal Decentralization Indicators for South-East Europe, 2006–15,” sixth edition, May 2017.
- Oates, W. E., 1972, “Fiscal Federalism,” Harcourt, Brace and Jovanovich, New York.
- Posner, Daniel. 2004. “Measuring Ethnic Fractionalization in Africa.” American Journal of Political Science 48 (4): pp. 849–63.
- Prud’Home, R. 2003. “Fiscal Decentralization in Africa: A Framework for Considering Reform.” Public Administration and Development, Volume 23, Issue 1: pp. 17–27.
- Rodrigues, A., and A. Kroijer. 2009. “Fiscal Decentralization and Economic Growth in Central and Eastern Europe.” London School of Economics Paper No. 12/2009, London School of Economics, London, England.
- Ter-Minassian, T. 1997. Fiscal Federalism in Theory and Practice. Washington, DC: International Monetary Fund.
- Thiessen, U., 2000, “Fiscal Federalism in Western European and Selected other Countries: Centralization or Decentralization? What is Better for Economic Growth?” Discussion Paper No. 224. Deutsches Institut für Wirtschanftsforschung, Berlin.
- Thiessen, U., 2003, “Fiscal Decentralization and Economic Growth in High-Income OECD Countries.” Fiscal Studies 24: pp. 237–74.
- World Bank. 1999. “Decentralization: Rethinking Government” in “World Development Report 1999/2000: Entering the 21st Century”, Chapter 5, pp. 107–124, Washington DC.
- World Bank. 2000. “Achievements and Challenges of Fiscal Decentralization: Lessons from Mexico,” edited by Giugale, M. and S. Webb, Washington DC.
- World Bank. 2012. “Devolution Without Disruption: Pathways to a Successful New Kenya” (http:// documents .worldbank .org/ curated/ en/ 534071468272361395/ pdf/ NonAsciiFileName0 .pdf).

*References list from the original content unit.*

---


_Source: https://www.imf.org/-/media/files/publications/dp/2018/45912-dp1810lessons-for-effective-fiscal-decentralization-in-ssa.pdf_