Topic: Intergovernmental Fiscal Relations

The reform of fiscal systems to improve public sector performance in service delivery and establishing a framework of fiscal discipline and accountability at all levels of government has been a major focus area of reform in developing countries in recent years. The development of the WBI program on this subject reflects growing demand from World Bank operations and from client countries for knowledge sharing and learning from each other’s experiences.

Public sector governance (of which reform of the intergovernmental finance is an important aspect) is a major area of the Bank’s operational work, comprising 13 percent of the $18.5 billion in new lending in FY03. Over the period 1986 –2001, the World Bank has had programs in support of decentralization in 74 countries. In countries where major service delivery responsibilities have been decentralized to the local level, the ability of local governments to carry out these responsibilities becomes critically important. In this context, improvements in public service delivery, especially health, education and water and sanitation infrastructure are crucial to make progress in attaining the Millennium Development Goals.

The program also reflects a strong demand from clients, where sub-national governments are shouldering greater responsibilities for the delivery of basic public services and managing larger shares of public expenditure. Countries such as Pakistan, Uganda, and Indonesia have undertaken major reforms towards decentralizing expenditures and strengthening the role of local governments. A large number of countries representing all regions have sought WBI assistance for capacity building in this area.

The design of an equitable, efficient and accountable decentralized system requires a deep knowledge of the institutional context and path dependencies in each country. This program, by disseminating conceptual guidance and facilitating learning from each other’s experiences on ideas and practices, as well as customizing programs to individual country needs attempts to provide a better understanding of feasible reform options suited to an individual nation that best delivers efficient and equitable public services consistent with citizen preferences.

• Program Objective
• Course Contents
• References
• Learning Events 

Program Objective

The program aims to strengthen organizational capacity and build consensus and coalitions for reform in country led initiatives for improved intergovernmental fiscal relations and better local government performance.

This goal is to be accomplished by:

1. motivating, encouraging and training individuals in the use of analytical frameworks and tools to evaluate, design and implement institutional and administrative reforms related to intergovernmental fiscal relations and local government organization and finance;
2. facilitating global, national, regional and local dialogues on pathways to reform to infuse a spirit of learning from each others’ experiences.

Course Contents

The program is organized under two broad themes:

1. Intergovernmental Fiscal Relations
2. Local Government Organization and Finance

Intergovernmental Fiscal Relations

Intergovernmental fiscal relations covers all aspects of expenditure, revenue, and service delivery arrangements between the central, intermediate, and local levels of governments, including the assignment of expenditure, taxing and regulatory responsibilities frameworks for the delivery of public services.

In order to sustain growth, reduce poverty (especially among persons living in less developed regions), and provide vital public services, governments need to take a closer look at fiscal arrangements and other institutional reform options to facilitate efficient delivery and equitable access to public services. 

In each country in which the program is offered, the content of the delivered course is customized to the clients' needs. The program covers the following topics and in each case provides a conceptual framework in addition to an analysis and discussion tailored to the country’s institutional architecture:

• The Role of Government
• The Decentralization of Government Authority
• Expenditure Assignment
• Macroeconomic Management
• Revenue Assignment
• Revenue Sharing
• Intergovernmental Transfers
• Finance and Provision of Infrastructure, Health, Education, Poverty Reduction, Social Protection
• Institutions of Intergovernmental Relations

Local Government Organization and Finance

Major issues explored in this module include institutional arrangements and local government structures, local government responsibilities, and autonomy in carrying out responsibilities. Other topics include the special circumstances of urban, rural and metropolitan government finance, local budgeting and financial management, finance and provision of local public services, and approaches to public management.

Prior to embarking on any policy changes to strengthen local governments, an understanding of the institutional context of local government in each country is required. This knowledge is essential to determine feasible reform options as well as understanding the equity and efficiency implications of any proposed changes. For the following topics, the program provides a conceptual framework in addition to an analysis and discussion tailored to the country’s institutional framework and particular circumstances:

• Overview of local government system and structures
• Local government service delivery and regulatory responsibilities
• Local revenues
• Financing capital investment
• Local financial management
• Local public management