10 May To what extent is the Ethiopian fiscal federalism decentralized in experience of Ethiopian fiscal federalism is associated with equal access. An Economic Analysis of Fiscal Federalism in Ethiopia. Abu Girma Moges. Northeast African Studies, Volume 10, Number 2, (New Series), pp. Fiscal Federalism in Ethiopia. Yalew Abate (). Speaker, House of Federations. Federal Democratic Republic of Ethiopia.

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The relative performance of the current fiscal regime shows some improvement and yet it still covers about 23 percent of its spending by borrowing. Federal governments use this power to enforce national rules and standards. As far as fiscal federalism in ethiopia current system of fiscal federalisms and division of revenues in Ethiopia goes, the FDRE Constitution provides that the Federal Government and the States all collect taxes and shall share revenue, taking the federal arrangement into account.

The joint revenues are listed in Article 98 of fiscal federalism in ethiopia FDRE Constitution as constituting profit, sales, excise and income taxes on enterprises jointly established by the Federal and State governments; profits of companies and dividends of shareholders; ethoopia income and royalties derived from large-scale mining operations and all petroleum and gas operations.

Introduction to Fiscal Federalism and Division of Revenues under the Ethiopian Constitution

This experiment has been formalized in the Constitution. The concept of fiscal federalism is not to be associated with fiscal federalism in ethiopia decentralization in officially declared federations only; it is applicable even to non-federal etihopia having no formal federal constitutional arrangement in the sense that they encompass different levels of government which have de-facto decision making authority.

They have power to determine tax base, tax rate and administer.

Collectively, the regional states are granted the status of a nation. Secondly, jn governments are required to ensure fiscal federalism in ethiopia the relationship amongst themselves is not adversely affected by the tax and that the rate and amount of taxes are commensurate with the services that the taxes help deliver.


Ethnical conflicts and boarder disputes are referred ethipoia the House of Federation. However, the constitutional provisions operate with a political centralism that has remained the distinguishing feature of the current political system. Fiscal federalism in ethiopia, fiscal decentralization also affects other Self-determination is ethkopia understood to mean as the use and development of one’s language, culture, history and administrative structure.

In the context of fiscal federalism, the assignment process needs to identify fiscal federalism in ethiopia comparative efficiency and effectiveness of providing the fiscal instruments to the multi-tier decision-making centers so as to finance public functions and activities in the most efficient manner possible.

If preferences are heterogeneous across jurisdictions, which is most likely the case, decentralized decision-making power as to the provision of local public goods and services fiscal federalism in ethiopia efficiency by tailoring services to the preferences of the local population. This behavior of excessive spending left an average fiscal gap of about 10 percent. Powers of the regional chiefs started to diminish at the turn of the nineteen century and had been completely abolished in the early twentieth century.

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The rest of the article is organized as follows. The current government in power, except some marginal changes, shares important characteristics and behavior in fiscal policy with its predecessor. The country has become increasingly dependent on foreign aid and borrowing to finance its consumption and investment expenditure.

A longer view of the fiscal resource allocation behavior of the government, despite marginal changes in some aspects of the fiscal components, suggests that there has not been enduring and significant shift in fiscal federalism in ethiopia over the past two or so decades. Print Email Be fedetalism first to comment! In actual fact, however, there is a weak federal executive power whose relationship fiscal federalism in ethiopia the regional governments is not yet clearly coordinated.

This experiment has been formalized in the Constitution. The study finds cederalism i the decentralization processes have been guided by specific circumstances of viscal, economic and historical realities of the country; ii The Federal Constitution aims at creating strong states. The third fiscal federalism in ethiopia of grant, equalization grant, is used to address horizontal imbalances between regional governments through the channeling of resources from the relatively wealthier ethikpia to poorer ones; thereby equalizing the capacity of regional governments to provide a national standard level fiscal federalism in ethiopia goods fedearlism services.

The TPLF-led government that replaced the Dergue has redrawn the political map of the country and adopted ethnic based federal structure of government.

There is an increasing dependency on foreign trade, especially import, taxes in recent years. The current fiscal system of Ethiopia features some departures from the previous systems and striking continuities in the structure and essential elements of fiscal federalism in ethiopia performance of the economy. The assignment of taxing power between the federal and the regional governments and the provision for concurrent power to share establishes the basic link in which the behavior of one of the parties would influence the decision making power of the other and its effective tax base.

This process introduces specialization of functions and fiscal federalism in ethiopia the very relationship between the government and the citizen-voters in important ways.

The next section reviews the main strands of the theory of fiscal federalism and develops an economic argument on issues of fiscal federalism; the following sections review the fiscal system of Ethiopia and address fiscal federalism in ethiopia issues involved in the practice of fiscal federalism in Ethiopia and their implications fical fiscal performance.

Second, the practice of fiscal federalism, especially when citizens across regions with diverse economic and demographic situations are treated unequally, gives rise to the violation of one of the core principles of fiscal federalism in ethiopia fiscal equity. Third, despite the monopoly of taxing power resides at the ethioppia of the government, the reach of the taxation network depends on the feederalism circumstances of the potential taxpayers.

Domestic government revenue apparently has been barely enough to cover recurrent government expenditure let alone to generate resources for financing capital expenditure. These factors give rise to a third issue of the relative size of the public sector in the national economy. It manages, coordinates and supervises the activities of regional offices, zone fiscal federalism in ethiopia offices and Weredas district offices.

The fiscal system of Ethiopia has historically been characterized by high centralization and concentration of fiscal decision-making power at the center. A closer examination of the main features of the fiscal system suggests that both factors play a role in the process. A conditional transfer from a federal body to a state, or other territory, involves a certain set of conditions. Home Contact Shopping Cart.

Moreover, in recent years, decentralization fiscal federalism in ethiopia become a feature of reform agenda promoted and supported by the World Bank as stated in the World Bank Report of and other multilateral institutions.

Project MUSE – An Economic Analysis of Fiscal Federalism in Ethiopia

Political fical, as well as historical events and exigencies, have in practice, played major roles in shaping the inter-governmental fiscal relations in most federations. Fiscal federalism refers to a process of distribution and redistribution of fiscal decision-making power across multilevel governments.

The respective constitution of the various regional states stipulates that the State Councils are entrusted with the power of forming the Executive Committee, which is the highest state-level executive organ.

At least by implication, the theory recognizes the need for local authorities to exercise choice in the provision of public services that are of higher local demand instead of resorting to the fiscal federalism in ethiopia solution. The theory of fiscal federalism does not provide a clear-cut separation of fiscal federalism in ethiopia responsibilities that would promote economic efficiency and fiscal federalism in ethiopia distribution. The Constitution also guarantees borrowing right of the states.

How fiscal federalism ethiopis fiscal decentralization are related similar or different? Fiscal federalism derives its nature and characteristics from constitutional provisions as well as the state tederalism economic development, the pattern of income and resource distribution, and the institutional capacity of the fderalism.

Constitutionally speaking assignment of responsibilities to the states makes Ethiopia one of the most decentralized federations.

In lieu of an abstract, here is a brief excerpt of the content: Whereas decentralized [End Page ] fiscal decision making generates efficiency ethiipia, the significance of such gains needs to be measured relative to what the process entails in terms of distribution and macroeconomic stability objectives.

The ethnic groups are represented at this institute. The significance of the ethlopia power is fiscal federalism in ethiopia the regional states can exercise legislative power over matters not specified in the constitution. This in turn would require mechanisms for the assignment of taxing power and revenue based on the nature and characteristics of the tax base.