Fiscal Federalism: Evaluation of Ethiopia's Recent Experience
No Thumbnail Available
Date
2000-06
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
A.A.U
Abstract
With the change or government in 1991 Ethiopia made a transition from a highly centralized
political and economic system to that or a federal system. Parallel with the administrative
restructuring, the liscal system was reformed to fit the federal arrangement. expenditure and
revenue powers were assigned to the federal and regional governments and various solutions were
designed for the problems in the intergovernmental fiscal relations.
As a new experience, this radical shin from centralism has laced many challenges, but equally, has
made a lot of progress. The expenditure assignment is highly decentralized. The regions have
taken major res responsibilities in agriculture, education and health : and a considerable sharc in the
expansion of ot her social and economic infrastructure. Especially the previously neglected
peripheral regions are getting more attention by the federal government to improve their
backward situation .
On the revenue s id e, though the assignment is not far from what economic theory suggests, in
practice the center controls the largest share- about 83%, and the regions, only 17%. The regions'
own revenue could only cover about 3 I % of their expenditure. As a result a large share of their
budget is financed by central government transfers. Hence there is still greater dependence on the
center.
The main causes lo r the high dependency, besides the assignment problem, is the poor economy
of th e country. Most of the regions have low tax capacity most economic activities are
concentrated on very few areas. There is wide diversity among the regions in population, natural
resource, infrastructure, manpower capacity etc. and some regions are more disadvantaged than
others in various criteria . Among the problems in the decentralization process, manpower problel11
has been the major bottleneck for inefficient and low budget utilization . The decentralization
process could not go to lower administrative levels as was intended due to manpower constraint
especially in some regions.
Though there are improvements in the performance of the regions over the years, greater effort is
needed to solve the multifaceted problems. Extensive training especially in the previously
disadvantaged areas; civil service reform specially in the salary scale: revising the deficiencies in
the laws, procedures and directives regarding borrowing, revenue sharing, budge ting process etc.;
modifying the revenue assignment in favor of the regions; strengthening joint forums between the
regions and the center to discuss and solve problems: improving the political environment of some
of the regions; arc some or the issues which need emphasis. thc central government should playa
greater role to improve the conditions that would enable the regions to reduce their dependence
and increase their autonomy.
given Ethiopia's enormous diversity in ethnic and other criteria, and given its history or internal
conflicts, we call say that a decentralized administrative structure with federal relations among the
regions is the most appropriate form of government. The short comings and ambiguities in the law
that deal with the intergovernmental fiscal relations and other arrangements, and the deficiencies
that are seen ill the regional government s' fiscal and other performances should not be causes for
totally discrediting the system and cases for opting an alternative towards a highly centralist
tradition.
Description
Keywords
Evaluation of Ethiopia's, Fiscal Federalism