Sequencing Fiscal Decentralization Roy Bahl and Jorge Martinez-Vazquez Andrew young School of Policy Studies Georgia State University Atlanta, Georgia 30303

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Sequencing Fiscal DecentralizationRoy Bahl and
Jorge Martinez-VazquezAndrew young School of
Policy StudiesGeorgia State UniversityAtlanta,
Georgia 30303

• Comments Based on the Sierra Leone Experience
• Ousman Barrie,
• Local Government Finance Department
• Ministry of Finance, Sierra Leone,
• April 25, 2005

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Introductory Remarks

• The aim of these comments is experience sharing
  on the issue of sequencing fiscal
  decentralization
• Yes, sequencing matters comprehensiveness is
  crucial and missing the steps can be costly
• Practical realities often dictate deviations from
  the normative

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Background to Fiscal Decentralization in Sierra
Leone

• Back to FD after 32 years of Centralization
• Previous system failed largely due to lack of
  revenue autonomy
• One-third of the 33 years of centralized
  governance were civil war years
• Pre-decentralization deconcentration was highly
  asymmetric sector-wise
• Decentralization preceded by years of reforms
  in other areas with less than desirable impact
• institutional constraints to effective service
  delivery in Sierra Leone

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Objectives of Fiscal Decentralization in Sierra
Leone

• The strongest reasons relate to economic
  development, political decentralization, fiscal
  discipline and administrative efficiency

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Features of the Fiscal Decentralization System

• Hard budget constraint
• Borrowing by councils must be within guidelines
• Councils prepare and approve own budgets
• Councils provided with broad revenue raising
  powers with rate fixing powers
• Funds follow the functions
• Horizontal distribution of grants by formula

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Champions

• Strong
• The people and their elected representatives
• The President
• Ministry of Finance
• External Donors
• Weak
• Line MDAs
• Ambivalent
• Ministry of Local Govt

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Expenditure Assignment and Local Government
Budget Processes

• the expenditure assignment will be gradual,
  synchronised with an intensive capacity building
  for the councils
• councils prepare and approve their own budgets,
  based on indicative grants ceiling from the
  centre, and their estimated own revenue

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Revenue Assignment and Resource Distribution

• Local councils have various revenue sources
  assigned to them, including head taxes, user
  fees, property rates, business licenses, shares
  in mining revenues, etc
• a grants distribution system has been designed to
  reflect relative resource requirements on a
  function by function basis

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Capacity Constraints and Capacity Building

• capacity building high on the fiscal
  decentralization agenda of Sierra Leone
• Brand new councils
• An inexperienced and long alienated electorate
• Extremely Weak capacity at the centre
• Minimal degree of deconcentration

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Challenges and Risks

• Harmonizing and synchronizing donor interventions
• Catching up on the outstanding implementing
  regulations and guidelines
• Harmonizing existing laws
• Transfer the hiring and firing powers in sync
  with the devolution process