Fiscal Decentralisation – learning objectives

Day 4 of the Face-to-Face Meeting: Learning Objectives and Expected Results

Intergovernmental Fiscal Transfer Schemes

Intergovernmental fiscal transfer schemes (IGFTS) are a cornerstone of multi-level governance systems in many countries. Often they constitute the bulk of a subnational government’s total resources. Transfers are a sensitive fiscal instrument where several design elements need to be brought in line in order to achieve the desired outcome.

There are several important economic objectives for transfers: to correct vertical imbalances in revenues between central government and subnational governments arising from the distribution of tax powers and expenditure responsibilities; to correct horizontal imbalances due to different needs, costs or levels of fiscal capacity; and to address inter-jurisdictional spillovers (externalities), which may otherwise lead to under-provision of public goods. Grants, through a series of conditionalities, are also used to signal spending priorities in areas where the central government cannot intervene directly; this creates a tension between local autonomy and national development objectives.
SDC supports a series of countries around the world for a strengthening of their intergovernmental fiscal transfer systems. This requires taking a deeper look at the relevant implementation experience in an area of high potential future demand. To this end, Day 4 of the F2F is devoted to this critical topic which is being addressed through in-depth discussion and peer-to-peer exchange.
To this end, the sessions are organized into four thematic areas:

  1. a framing and introductory session;
  2. transfers in situations of conflict and fragility;
  3. implementation challenges; and
  4. a concluding session focused on the role of SDC.

 

1. Intergovernmental transfers – setting the frame

Learning objective. The session will provide the conceptual elements of intergovernmental transfers. This chiefly includes a summary of the varied objectives of transfers and the key design elements which need to go hand in hand. Key design options are, among others, rule–based functioning versus ad-hoc and discretion; unconditional versus conditional grants; and a series of horizontal allocation criteria which may include equalization and targeting (to territories or population groups, including gender aspects). This introductory session will also discuss recent trends in a field of evolving practice, where design elements are being adjusted according to varied circumstances and emerging evidence. Participants are also informed about the key messages of the DDLGN learning book with regards to international good practice in supporting transfers and possible SDC support.

Guiding questions:
  • What are the key messages of the learning book related to IGFTS and the role of SDC?
  • What are objectives of transfers and their key design elements?
  • What are major challenges, typical bottlenecks, and constraints for implementation?
  • What are international trends with regard to transfer schemes? How are donors positioned, and what are major trends in the development community?

Expected Results: Participants do have a conceptual frame regarding IGFTS that facilitates an informed discussion among peers about implementation experience.

2. Intergovernmental Transfers in Fragile and Conflict Situations

Learning Objective. This session deepens analysis on the particular features and challenges in contexts of fragile and conflict situations. In these settings “fiscal appeasement” takes a prominent role: resource distribution to subnational units and their supporting groups is done in an exchange for a commitment to not further deepen existing conflicts. Related, a key objective is to finance the public wage bill which often increases on accelerated pace in the absence of employment opportunities in the private sector. However management and decision-making on public employment is often done in a disjointed manner among central and subnational levels which further contributes to the fiscal cost. Transfer design in such contexts is therefore particularly complex and most likely needs to be done by sacrificing some of the well-established principles.
Discussants will enrich the analysis by highlight key design features of transfers operating in different intergovernmental models. This will provide hands-on insights about implementation challenges; the possible impact on conflict transformation; and the role of Development Partners and SDC in supporting transfer schemes in these settings.

Guiding questions:
  • What are objectives of transfers and their key design elements in the particular context of conflict and fragile situations?
  • What are major challenges, typical bottlenecks, and constraints for implementation?
  • How could a possible reform and strengthening of intergovernmental relations look like?
  • What is the role of donors?

Expected results: Participants understand what design principles have to be amended and applied flexibly in conflict settings; the potential effects of transfers in terms of conflict transformation; and the sensitive role of external support given that donors can be drawn into domestic peace deals.

3. Implementation challenges of intergovernmental transfers

Learning Objective. The objective of the group work is to identify and distill implementation experience of transfers. Participants nurture this discussion from the perspective of their most varied country contexts, exploring ways to overcome the most common bottlenecks, taking into account a political economy perspective.
Several country cases covering most world regions will be presented by peers. This will further illustrate the diverse objectives, design elements, implementation challenges and how they can be addressed.

Guiding questions:
  • In practice, what objectives and design elements of transfers are particularly important? How are accountability dimensions considered?
  • What are key challenges for implementation? How do we address these challenges?
  • What is the role of SDC with regards to transfers?

Expected results: Key challenges and success factors for implementation of intergovernmental transfers are identified.

4. Concluding Session – The role of SDC

Learning Objective. This concluding session will summarize the main findings from the peer to peer exchange on transfers, establishing a link to the core topic of accountability discussed on Day 1 and 2. One particular focus will be on the varied roles that SDC can potentially play; the support instruments that can be used (technical assistance; policy dialogue; financial assistance; others); the tactical choices and strategic approaches that allow engagement on a politically sensitive topic and an often quickly evolving agenda; not least also options “to exit” the support for transfers if found too complex or leading to unintended consequences.

Guiding questions:
  • What design elements are specific to different country contexts and intergovernmental settings?
  • What are the key implementation challenges?
  • What is the role of SDC with regards to transfers?
  • What connects the transfer theme to the accountability topic?
  • Where do we want to go from here in terms of further learning – what main topics need further consideration in the future?

Expected results: Participants have a shared understanding on key conclusions and lessons learned with regards to implementation of intergovernmental transfers. The future learning agenda of DDLGN is identified (a theme that will be picked up again on Friday in the final sessions).

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