Federal-State Fiscal Relation: The Ethiopian Experience (A Descriptive Study of the Southern Nation, Nationalities, and People’s Regional State)

Abstract

This study focuses on the central-state relation on public expenditures from the view points of public preferences at subnational governments’ level and financing responsibilities incurred at the state and federal levels to accomplish the overall economic directions of the country. The study touches on how traditional views of public expenditures work in central-local relations and how they work in overall public revenue and expenditure responsibilities. It presents the revenue productivity and the degree of dependence of the regional governments on the central/federal government grants and what impacts this dependence would have on local revenue and expenditure, as well as the overall public responsibilities. Moreover, it shows how and why public sectors should minimize the degree of dependence on federal grants, and the relevance of revenue sources from constitutional point of view.

Key words: Fiscal decentralization, federal grant, revenue from own sources, public expenditure, total revenue, subnational governments dependence