Fiscal Equalization Performance of Fiscal Transfer in Ethioipia (The Case of Federal Government and, Oro Mia and Snnp Regions Block Grant Transfer)
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Date
2012-06
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Addis Ababa University
Abstract
This study aims at evaluating the fi scal equalization performance of the fed eral and, Oromia and
SNNP regions block grant transfer. In order to achieve thi s, actual implementation of the block
grant allocation at the federal and in the two regions were first evaluated based on normative
theory of fiscal transfer.
The review suggests that the federal government allocation mechanism has been evolved towards
equalizing both expenditure needs and revenue rai sing capacities of regional governments. while
in the two regions, in spite of the effort to link the block grant transfer with expenditure needs
and revenue raising capacities of local governments, the transfer mechanisms have suffered with
several shortcoming in its actual implementation due to lack of appropriate data of expenditure
needs and revenue raising capacities of their respective local governments.
In order to achieve the stated major obj ective, i.e. to evaluate the equalization performance of the
federal and the two regions block grant transfer, the per capita before and after block grant
transfer revenue variation and the relationship between per capita block grant with expenditure
needs and revenue raising capacities has been analyzed using coefficient of variation and
regression estimation techniques respective ly. Both analyses suggest, the block transfers have
been equalizing over the period. However, the result of regression analysis suggests, the federal
block grant allocation has been both revenue raising capacity and expenditure need equalizing,
whereas, the two regions block grant allocations have been reinforced the federal government
equalization effort only in equalizing expenditure needs oflocal governments.
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Fiscal Transfer in Ethioipia