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.
Stefan’s presentation for download
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.
Jona’s presentation for download
Hussain Akhlaqi, SDC Afghanistan, and Dahir Korow, SDC Horn of Africa, analysed the situation and conflict dynamics in their countries from a perspective of fiscal transfers.
|Hussain’s presentation for download
||Dahir’s presentation for download
Here the learning objectives of this session.
Based on the country contexts of Bénin, Somalia, Mali, Burundi, Bangladesh and Nepal – and from their own background – participants reflected on what kind of objectives and design elements of fiscal transfer are particularly important, what kind of implementation challenges are to be met, and what role SDC could take up with regard to transfers. The country examples triggered a lifely exchange of experience and new ideas.
A panel discussion among and with the facilitators of the previous group discussions concluded the day. Experience supporting financial transfer systems in fragile and more stable contexts was shared. It was mentioned, among other things, that the debate on financial transfers cannot be separated from the transfer of functions in order to avoid the mismatch of responsibilities and resources at the various levels. Several discussants also mentioned that financial fransfers have to be assessed in the light of improving accountability and thus closely monitored. Some debate arose around the question whether SDC should insist that supported transfers are made under certain conditions (inclusion, gender). In fragile situations the financial transfers should allow for delivering services at the local level, thus building trust and credibility and contribute to state-building. To conclude, it was also reminded that transfer systems have to be addressed in a systemic way – as one aspect of SDC’s contribution to good governance.
You can download the discussion boards here.
In this video Jonas Frank, who has been heading the IGFT discussion, tells us what he would like the participants to take home:
Boadway, Robin; Shah, Anwar (eds). 2007. Intergovernmental Fiscal Transfers, Principles and Practice. Public Sector Governance and Accountability Series, World Bank, Washington DC.
Litvack, Jennie. 1998. Decentralization Briefing Notes, World Bank, Washington DC.
LOGIN Asia. 2014. Distance Learning Programme on Fiscal Decentralization. Delhi.
SDC. 2013. Learning Book, Sustainable Local Government Finances, Berne.
Vaillancourt, François; Roch-Hansen, Catherine. 2012. An Introduction to Transfers. Municipal Finance E-Learning Course, World Bank, Washington DC.
NALAS Report: Fiscal decentralization indicators for South-East Europe: 2006-2013, Network of Associations of Local Authorities of S-E Europe, January 2015
For further reading visit the NALAS webpage.
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. Continue reading Fiscal Decentralisation – learning objectives