Intergovernmental Fiscal Transfers and Decentralization Initiatives in Sub-Saharan Africa: A Case Study of SNGs in Kenya
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Date
2022
Authors
Rutto, Andrew
Minja, David
Kosimbei, George
Journal Title
Journal ISSN
Volume Title
Publisher
SDMIMD
Abstract
Intergovernmental fiscal transfer is a pillar of fiscal decentralization initiatives in developing and transition
economies. These transfers serve several functions that include: correcting the vertical and the horizontal
fiscal balances, compensating or offsetting for the spill-overs or externalities between different jurisdictions,
funding national priorities and administrative priorities and capacities of the national. However, SNGs in
developing countries particularly in Sub-saharan Africa is struggling with fiscal decentralization initiatives
due to the lowered potential of local revenue generation. Due to these gaps in studies on Intergovernmental
Fiscal Transfers (IGFT) in devolved government structures, the study evaluated how IGFT is organized and
structured in Kenya. The study adopted a descriptive design and undertook a review of publicly available data
which was supported by interviews of selected directors from the budget, finance and planning departments in
three county governments of Baringo, Kiambu and Vihiga. The study established that intergovernmental fiscal
transfers make up 87 per cent of SNG revenues, equalization fund is about 2 per cent while own source revenues
make up 10 per cent. Other revenue sources are conditional transfers in form of ad hoc and cost-reimbursement
approaches from both the national government and development partners. Regarding intergovernmental fiscal
transfers, the national government should disburse funds in a timely and efficient manner to enable county
governments to fulfil their mandates. The study makes the following conclusions; there is an overreliance on
intergovernmental fiscal transfers by SNGs and this might constrain their capacity to provide services and impede
devolution initiatives; the formula-based unconditional grant in Kenya offers great prospects for devolution
and the rise in unconditional transfers portends well for SNGs. The study recommends that SNGs speed up the
legal mechanism for identifying and classifying and assigning local revenues, the national government should
consider introducing or substituting fiscal transfers with the tax-sharing arrangement to incentivize revenue
diversification among SNGs and lastly, SNGs should consider pooling of resources to incorporate special
purpose vehicles for sub-national government borrowing. The study contributes to the existing knowledge by
delving more into the elements of fiscal decentralization and in particular intergovernmental fiscal transfers.
Recommendations for further studies include studies on how other elements of decentralization impact the
performance of the counties, how decentralization is improving governance at the local level and how the East
African Community may affect governance and service delivery at the sub-national levels.
Description
Article
Keywords
County Governments, Decentralization, Local Governments, Local Revenue Decisions, Subnational Government (SNGs)
Citation
Rutto, A., Minja, D., & Kosimbei, G. (2022). Intergovernmental Fiscal Transfers and Decentralization Initiatives in Sub-Saharan Africa: A Case Study of SNGs in Kenya. SDMIMD Journal of Management, 45-60.