Subnational Financial Authonomy In A Developmental State The Case Of Ethiopia

Triggered by, or justified with, different factors, federations exhibit significantly variation in their respective form, nature and degree of decentralizations. Regardless of all these differences, however, the necessity of bestowing genuine autonomy for subnational governments had never been contested. Thus, it is hardly possible to think of a federation without constitutionally mandated allocations of political powers among different tires of governments. Indisputably, a mere constitutional stipulation doesn’t guarantee the financial autonomy of subnational governments despite it is mandatory and inherent in any federal system. Inspired by literatures on the impacts of the political economy of a government on its federal system, this research emphasizes on the contemporary political economy narratives of the Ethiopian government, i.e. the “developmental state of Ethiopia” and its pitfalls with respect to ensuring genuine financial autonomy of regions. Exploring theoretical foundations and nexuses between the developmental state paradigm and fiscal federalism, the study argues that the impacts of developmentalism on subnational financial autonomy are multifaceted, including its contribution for the existing fiscal imbalance. It also tries to show the impacts of the developmental paradigm on the spending autonomy of regions, which is highly constrained by the over-centralized policymaking accompanied by the mismatches between the ever-increasing federal unfunded mandates and the continuously decreasing shares of block grants. The research further points out how the developmental state paradigm has been shaping external financing, domestic borrowings and federal special purpose grants, which are entangled with stringent conditions. Scrutinizing all the challenges posed by the developmental narrative, the study finally tries to solicit the possible means of addressing the contemporary problems of subnational financial autonomy in the Ethiopian federal system.

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