Presented at the World Bank Washington, DC January, 24 2007
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Transcript of Presented at the World Bank Washington, DC January, 24 2007
Fiscal Decentralization Policy Design in a Post-Conflict Country: The Case of Rwanda
Sylvain H. BokoWake Forest University
Presented at the World Bank
Washington, DCJanuary, 24 2007
Vision and Foundation of Decentralization (GoR)
• Community participation
• Local decision making power
• Local autonomy• Efficiency
Sustainable development
Poverty reduction
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UMUTARA
GATSIBO
KAYONZA
KIREHE
KIBUYE
RUTSIRO
BUGESERA
BYUMBA
KIBUNGO
GIKONGORO
NYAMASHEKE
CYANGUGU
NYANZA
NYARUGURU
BURERA
GAKENKE
BUTARE
KAMONYI
GISAGARA
RULINDO
RUHANGO
GITARAMA
NYABIHU
NGORORERO
RWAMAGANA
GASABO
GISENYI
RUHENGERI
KICUKIRO
NYARUGENGE
IMBIBI NSHYA Z'UTURERE TW'U RWANDA
.1:1 000 000
Legend
" Bureau de district
Parc
Limite de la région et la Ville de Kigali
Lac
Limite de district
Table 2.1: New Roles under Decentralised Service delivery
LevelRole
Central Government
Establishment of national policies and strategies for local service delivery, the elaboration of systems and guidelines for local governments, the provision of fiscal transfers to enable services delivery, and the monitoring of and provision of support to local governments in the delivery of services.
Local Government
Delivery of services, within the context of national policies and guidelines, which are responsive to the needs of the local population, and oriented towards the achievement of national policy objectives
MISSION #1 (Nov-Dec 05)
• Drafting a new GoR Fiscal Decentralization Policy
• Review and Update the GoR Revenue Sources Law
• Planning for Implementation of FD Policy
Existing Problems
• Weak institutional capacity at all levels
• Uneven local resource mobilization capacity
• Weak coordination
• Inadequate funding
Key Objectives
• Create an efficient and sustainable resource mobilization base for local communities
• Provide local Districts with an adequate and equitable level of resources and revenue mobilization powers (Finance Follows Function)
• Strengthen planning and management capacity at the local level through a participative approach
• Foster local Districts’ financial autonomy in the long run
Some Strategies
Incremental revenue generation based on local economic growth Diversification of sources of revenue Development and application of equalization formulae for transfers
for Block and Earmarked grants based on local socio-economic needs and performance
Institutionalization of a system of checks-and-balances through the involvement of grassroots organizations in the budgetary process
Institution of a code of conduct at all levels Development of Information Education and Communication (IEC)
mechanisms for an enhanced community participation
Review the Source of Revenue for Districts Law
Empowerment of local Districts• Delegation of new resource mobilization powers • Definition of new sources of revenue (i.e., notary fees) • Broadening of local tax base (% of income tax or VAT
returned to local Districts)• Integrating sectoral decentralization in local and
central fiscal and financial decision making • Clear definition of intergovernmental fiscal and
financial relations• Strengthening of tax collection procedures
(Privatization, if necessary)• Strengthening of fiscal and financial management
code of conduct• Focus on a participatory approach in all phases of FD
decision making and implementation process.
Implementation plan
Activities Year 1 Year 2 Year 3 Year 4
• Updating FD regulatory framework relative to resource mobilization powers and capacity at local level
• Provision of training and capacity to elected local leaders to carry out their responsibilities
• Enhancing technical capacity at the local level
• Definition of clear guidelines governing intergovernmental financial relations
• Design and Implementation of Information, Education and Communication strategies
• Development of a code of conduct for good governance based on ethics, values and best practices
• Enforcement of code of conduct• Monitoring and evaluation based on clear
performance indicators
MISSION #2 (March 06)
• Designing Equalization Formula for Intergovernmental Transfers
Why Transfer Grants?
• Transfer grants are important component government menu of public financing instruments.
• Transfer grants usually form the initial resource base for the decentralized local communities.
• By compensating Districts with smaller fiscal capacity, equalization transfers are used to reduce the horizontal fiscal imbalance, and the regional disparities and inequities that can exist in a country.
• Equalization transfers can be used to diffuse regionalism, separatism, and other political forces.
• Through equalization grants, the GOR can pursue complementary objectives, such as to stimulate fiscal effort for example.
Why is a new Formula Needed?
• Components of the old Equalization Formula:– Population– Area– Poverty (based on disparities in tax revenues)– Performance (based on submission of administrative
reports)
• Disadvantages of the old Formula– Not based on Districts service demands and Not based on Districts service demands and
expenditures needsexpenditures needs
Principles of Equalization Formula
• Vertical balance• Horizontal balance• Stability • Predictability• Fairness• Transparency• Simplicity• Political-neutrality
Elements of the new Equalization Formula
• Based on:– Districts Service Demands and Expenditures Needs,
which include:• Education Services (Pupils per teacher/#of Schools)• Health Services (Patients per Doctor/# of facilities)• Administrative Cost (Area)• Service Pressure (Density)• Number of Sectors
– Fiscal Responsiveness Factor– Common Factor
Challenges
• Language
• Conflicting agendas among “development partners”
• Conflicting agendas among government Ministries
• Representing other stakeholders’ viewpoints
Results
• Policy and laws adopted by the cabinet in October ’05.
DECENTRALIZATION IN POST-CONFLICT COUNTRIES• Decentralization (and generally
democratization) as a means to prevent violent conflicts for secession – Paul Collier (2004) – Ehrke (1994) – Alesina and Spolaore (1997, and 2003) – Panizza (1998)
THANK YOU!