Folscher, Alta. 2007.  Local Fiscal Discipline: Fiscal Prudence, Transparency, and Accountability. In Local Budgeting edited by Anwar Shah. Washington, D.C.: The World Bank.

Developing countries’ local government budgets are coming under increasing strain. Rapidly growing urban populations are demanding more services, while tax bases are expanding slowly and central governments are decentralizing functions without additional intergovernmental transfers. Many cities not only face demand for higher levels of service provision, but also must come to terms with significant infrastructure backlogs and the need to allocate additional resources to maintenance and replacement of deteriorating or obsolete infrastructure.

Different local governments respond to fiscal stress in different ways. Avenues of response are a function of the national environment within which they operate and of local capacity and institutional arrangements. This chapter addresses four key questions. What is local fiscal discipline? What is the value of local government fiscal discipline? What are the consequences of poor local fiscal discipline? What institutions at the intergovernmental and local levels are important for local fiscal discipline?

Comment on this paper (view posting guidelines)