Stefan Bruni, public finance specialist at the University of Lucerne, introduced participants to the logics of intergovernmental fiscal transfers. Such transfers are serving a variety of purposes such as bridging the vertical gap between central and subnational authorities’ tasks and resources. Transfers also can compensate and subsidize spill-over effects of subnational services (benefitting other subnational entities). Finally, transfer can aim at financial equalization: redistribution of resources with a view to ensure a common minimal standard of Services at subnational level. In this video Stefan Bruni explains why IGFTs exist:
Various types of grants can be distinguished, earmarked (conditioned) or non-earmarked (non-conditioned), mandatory or discretionary, for a general purpose or block grants, non-matching or matching grants. They all have specific characteristics and implications for central and local authorities, and they fit the various purposes of fiscal transfer in a differentiated manner.
Jonas Frank, DDLGN focal point team, pointed out that fiscal conflicts are a permanent feature of intergovernmental systems. In fragile and conflict situations fiscal transfers are often aiming at fiscal appeasement, preserving the union and avoiding secession, or averting internal mobility and avoiding migration. Transferred resources are often going into military and security spending as well as in increasing human resources whose responsibilities are often disconnected across the government system. As donor money is part of domestic resource bargains, donors should set priorities, such as: ensure effective transfer to sub-national authorities, share information on transfers and budgets to build trust, build up fiscal coordination mechanism, invest in understanding the context, provide guidance for evolving intergovernmental negotiation.
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