The Federal Democratic Republic of Ethiopia: Selected Issues and Statistical Appendix
Author: International Monetary Fund
Publication Date:
28 Jan 2005
eISBN:
9781451812749
Language:
English
Keywords:
ISCR; CR; goods; potential GDP; appreciation; government; nontradable goods; regime; expenditure responsibility; block grant formula; tax administration; decentralized expenditure responsibility; block grant transfer; Tax administration core functions
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This Selected Issues paper assesses the implications of a significant increase in the flow of external financing and grants on real GDP growth in Ethiopia. The paper presents an analysis of the sources of growth during 1991/92–2003/04, as well as an assessment of potential GDP growth. The paper also seeks to assess the historical relationship between foreign aid and the performance of the external sector in Ethiopia to establish whether foreign aid inflows have had an adverse effect on the tradable goods sector in the past.

Abstract

This Selected Issues paper assesses the implications of a significant increase in the flow of external financing and grants on real GDP growth in Ethiopia. The paper presents an analysis of the sources of growth during 1991/92–2003/04, as well as an assessment of potential GDP growth. The paper also seeks to assess the historical relationship between foreign aid and the performance of the external sector in Ethiopia to establish whether foreign aid inflows have had an adverse effect on the tradable goods sector in the past.

IV. Structural Reform Priorities for Improving Fiscal Management in Ethiopia10

A. Introduction

39. This section surveys current and emerging priorities for the structural reform of fiscal management in Ethiopia.11 In advance of possibly stepped-up donor aid to achieve the Millennium Development Goals (MDGs), a critical objective will be to develop the capacity of fiscal institutions in order to improve poverty-reduction outcomes. In this manner, advancing structural reforms in the areas of fiscal decentralization, public expenditure management (PEM), and revenue administration will represent key aspects of the broader reform agenda. Further, pursuing these structural reforms will support decentralized democratic governance, strengthen budgeting capacity, and build institutions that foster private sector development.

40. The paper assesses the still unfolding process of fiscal decentralization, which has represented the predominant reform priority of recent years. Contrary to initial concerns about diminished macro-fiscal control, decentralization has proceeded relatively smoothly, given the rapid timetable for its implementation. In addition, decentralization has successfully enhanced opportunities for democratic governance. Although decentralization is unlikely to deliver large efficiency gains in the short term, the process holds the potential to yield significant benefits over the longer term by enabling public spending to respond flexibly to regional priorities. A restructured system of intergovernmental block grants could facilitate this process, while ensuring that devolved mandates for social spending are not crowded out by the high cost of building local fiscal institutions.

41. Looking ahead, a broad range of structural reforms are also needed to enhance fiscal management more generally. For example, strengthening public expenditure management in the areas of budget formulation, execution, and reporting are critically needed to improve the effectiveness of poverty-reducing spending, particularly ahead of potentially higher MDG-related inflows. Private sector development can be supported by continuing reforms to the tax and customs administrations to enhance revenue-raising efficiency within an accommodating tax environment.

42. This section is organized in three parts. Part B outlines intergovernmental fiscal arrangements in Ethiopia, and assesses the recent decentralization in the context of the efficiency implications, the transfer formula and the impact for macro-fiscal stabilization. Part C surveys the key aspects of the reform process for public expenditure management, particularly budget formulation, auditing, and reporting. Finally, Part D explores reform priorities for the tax and customs administration that could enhance revenue-raising efficiency, encourage trade, and strengthen the business environment.

B. Fiscal Decentralization

Background

43. The general government comprises several levels of administration. For instance, the constitution provides for a central government, nine regional governments12, zonal-level administrations, two special city administrations for the largest urban areas (Addis Ababa and Dire Dawa), 550 woredas with elected councils, and six special woredas with the status of zones. There are also numerous municipalities with additional expenditure responsibilities. Table IV.1 summarizes the division of expenditure assignments following decentralization to the woredas.

Table IV.1.

Ethiopia: Expenditure Responsibilities Following Woredas Decentralization

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44. The first major wave of decentralization in the mid-1990s transferred expenditure responsibilities from the federal to regional governments. Decentralization was motivated by the goals of improving resource allocation while enhancing decentralized democratic governance, given the ethnic and socioeconomic diversity of the country.13 Continued administrative rigidity and fiscal hierarchy motivated a second wave of fiscal decentralization that began in 2001 with the four largest regions–Amhara, Oromiya, Southern Nations Nationalities and Peoples Region (SNNPR), and Tigray—proceeding as pilots in transferring expenditure responsibilities to the woredas.

45. Decentralization widened the fiscal asymmetry between spending mandates and revenue-raising potential. For instance, the federal government continues to collect over 80 percent of general government tax revenue, while the share of regional government fiscal operations has increased from about a quarter to a third of consolidated expenditure since 1999/2000 (Table IV.2). Regional governments also deliver an increasing proportion of consolidated pro-poor spending. For instance, the regions provide over 80 percent of total recurrent spending in health and education. Further, the regions provide over a third of consolidated capital spending in the social development sectors. In line with the decentralization of expenditure commitments, the total regional government budget deficit has increased by about 2 percent of GDP since 1999/2000, largely as a result of weak own-source revenue growth and higher expenditure commitments (Table IV.3).

Table IV.2.

Ethiopia: Regional Fiscal Operations as a Share of Consolidated Government 1/

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Sources: Ministry of Finance and Economic Development; and Fund staff estimates.

Beginning in 1997/98, data pertain to the period July 8-July 7; prior to that, data pertain to the period July 1-June 30. Data by disaggregated social sector represent preliminary estimates.

Revenue from taxes, rents, and fees levied and collected by the regional governments.

Table IV.3.

Ethiopia: Regional Fiscal Operations as a Share of GDP, 1998/99-2003/04 1/

article image
Sources: Ministry of Finance and Economic Development; and Fund staff estimates.

Beginning in 1997/98, data pertain to the period July 8-July 7; prior to that, data pertain to the period July 1-June 30.

Revenue from taxes, rents, and fees levied and collected by the regional governments.

Deficit (-) covered by direct transfer from federal government of joint tax receipts and foreign assistance.

46. An unconditional block grant represents the principal mechanism to balance resources across regions and governments. Transfers represent more than a third of federal spending, and finances about three-quarters of subnational government expenditure (Figure IV.1). Budgeted transfers have risen sharply since the conflict between Ethiopia and Eritrea abated in 1999, although outturns have fallen short (Figure IV.2A). The source of this uneven budget implementation has been lower-than-expected receipts of external aid, while domestic sources have met or even surpassed budget targets (Figure IV.2B). Despite a traditional policy goal of promoting balanced regional progress through block grants, in practice, there are large regional discrepancies in poverty-reducing expenditure per capita14, suggesting that the transfer system could be improved by delivering greater horizontal equity across regions.

Figure IV.1.
Figure IV.1.

Ethiopia: Block Grant as a Share of Federal and Regional Spending, 1998/99-2002/03

Citation: IMF Staff Country Reports 2005, 028; 10.5089/9781451812749.002.A004

Efficiency gains from Decentralization

47. Fiscal decentralization holds the potential to unlock significant efficiency gains, owing to the better matching of public spending with local priorities. For instance, regions have achieved varying degrees of economic development that could result in a differing pattern of local demand for public services. Further, decentralization can enhance democratic governance by improving accountability and accessibility to decision making. However, two factors have emerged in the Ethiopian context that could offset these benefits. First, the costs of building new fiscal institutions at the local level to manage devolved spending mandates have been larger than anticipated. Second, local budgets have limited expenditure and staffing flexibility to exploit potential efficiency gains.15

48. With respect to the cost of the decentralization, the largest region of Oromiya projected the need for a large increase in both recurrent and one-off spending to cover the higher wage bill and the fixed costs of providing new offices and equipment. For instance, regional authorities estimated the need for about 88,000 staff, excluding the health and education sectors. Although the higher federal transfer amounts to Birr 1 billion in 2002/03, the cost of a higher number of administrative staff amounts to Birr 1.1 billion per annum, based on federal staffing guidelines.16 As a result, there is a risk of creating unfunded mandates, unless federal transfers increase sufficiently to meet the larger-than-budgeted administrative costs associated with decentralization. There is also a risk that the federal and regional governments will retain a disproportionate share of public resources, so that woredas lack sufficient funds to meet higher spending obligations.

49. Wage costs dominate local government budgets, representing as much as 85-90 percent of total expenditure for some woredas.17 Further, the woredas typically lack autonomy in employment and wage setting. As a result, the woredas in practice have little flexibility in adjusting overall spending to better meet local priorities or improve service delivery, at least in the short term. Further, to address weak budgeting capacity at some woredas, higher levels of government provided guidelines for the composition of expenditure, such as the share of capital and recurrent spending. If these guidelines are rigidly followed in the future as a substitute for developing local budgeting capacity, then the flexibility of local budgets to realize opportunities for improved efficiency could be further restricted. In addition, woredas will need time to develop a capacity for identifying differences in local needs compared to the general guidelines, improve the operational use of available resources, and improve local revenue collection.

50. These factors suggest a limited scope for achieving significant efficiency gains in the short run, until local government capacity and budget flexibility improve. As a result, decentralization is unlikely to secure significant operational savings that could facilitate improved services delivery. The critical factor that will enable subnational governments to better meet local priorities will be sufficient transfers provided through the block grant system. However, the tight federal government budget constraint suggests that local authorities will need to rely on enhancing budget flexibility to achieve the potential efficiency gains available from fiscal decentralization.

The block grant formula

51. Fiscal arrangements in Ethiopia entail a significant asymmetry between the capacity to raise own-source revenue and expenditure responsibilities. Block grants have operated as the principal tool to address this vertical imbalance between governments. The current system also allows for greater horizontal balance so that lower-income regions receive a relatively higher share of total transfers. The current mechanism provides the federal government significant discretion in establishing the overall transfer envelope, which is determined using a macro-fiscal model, and after assuring that the federal government has retained sufficient resources to meet its own nondiscretionary spending needs. In practice, the block grant determines the final budget constraint of regional governments since they cannot borrow. Regional governments replicated the federal grant formula for distributing transfers to woredas, but in a simplified manner, given limited local sector data and evolving administrative capacity.

52. The decentralization from regions to woredas was implemented rapidly and with limited advance planning. However, a pragmatic and flexible approach greatly facilitated the transition, avoiding mismatches between expenditure mandates and available resources. In some cases, the block grant formula provided insufficient resources to local governments, relative to existing expenditure commitments. Regional governments, however, accommodated these shortfalls through contingency funds, hardship allowances for redeployed staff and pooled administrative resources to bolster capacity.18 This pragmatic approach avoided pervasive unfunded mandates or spending arrears during the transition. However, these solutions were transitional and nontransparent in nature, highlighting the need for a review of the block grant system to support the decentralization program looking ahead.

53. The federal transfer mechanism to regions has followed a largely unchanged formula since 1995. In particular, the formula involves variables that only proxy for actual expenditure needs. These variables include regional population in line with the 1994 census, percentage of residents living under the poverty line as determined by the Central Statistical Authority, a development index that measures public services provision, such as student-teacher ratios or health clinics per capita, and a revenue effort index calculated as the ratio of own-source revenue to recurrent spending. The weights attached to each variable have evolved somewhat over time, but in 2003/04, they were set at about 55 percent for population, 20 percent for the development index, 10 percent for the poverty index, and 15 percent for revenue effort. The formula for woredas varies somewhat by region, but typically incorporates similar variables, including population, an economic development index, and revenue mobilization.

54. There are a number of problems with the existing block grant formula. Perhaps most significantly, the factors driving the formula are not explicitly linked to preexisting expenditure commitments. The large population weight of about 60 percent determines most of the transfer, although population alone does not correspond directly to expenditure commitments, given the wide range in regional economic development. As a result, regions or woredas with a higher-than-average number of schools and health clinics tend to receive insufficient grants. Another problem relates to the development index, which equally weights each category of sectoral social spending, leading to a bias in the indicator, since the underlying components account for quite different shares of overall spending. For example, health spending typically absorbs at least half of the recurrent budget, but is weighted equally in the grant formula with smaller components of the budget. Finally, the proxy for revenue effort is calculated as the ratio of own-source revenue to recurrent spending. However, recurrent spending will be largely determined by revenue collections, confounding the information about local tax effort provided by the index.

55. A positive direction for the reform of the block grant formula would be to tighten its link to existing expenditure commitments so that the transfer closes the fiscal gap arising from the asymmetry in revenue and expenditure mandates. The international experience provides several models that could provide lessons for a similar mechanism in Ethiopia. For example, approaches based on the principle of “equalization” entail providing subnational governments with sufficient transfers so that comparable levels of public service can be offered across regions for a similar burden of taxation. In line with this approach, the formula should subsidize regions with a smaller tax base in order to finance comparable public services as higher-income regions. In the case of Ethiopia, the wide regional dispersion in poverty-reducing spending per capita suggests that a transfer system based on the principle of equalization could be a fruitful approach to achieve greater regional balance.

56. Finally, a challenging aspect for properly designing the grant formula is mitigating perverse performance incentives. For instance, grants can inadvertently reward failure or promote complacency in aggressively pursuing administrative reforms. For instance, if the effective tax base is actually greater than suggested by collections (perhaps owing to weak effort to expand capacity), then compensating federal grants would discourage needed reforms. In addition, the practice of offsetting federal block grants to regions that receive donor aid provides an incentive to misreport disbursements, or even reject external assistance to the detriment of overall national objectives. Reflecting this concern, the formula was modified somewhat during 2000/01 to incorporate partial offsets. Specifically, the offset for external financing was reduced to 70 percent, and just 30 percent for external grants.

Macro-fiscal stabilization following decentralization

57. A principal risk stemming from decentralization is loosened macro-fiscal control. For instance, there could be diminished prudence in fiscal policy implementation as numerous subnational governments become responsible for a large share of consolidated spending. Further, decentralization can entail efficiency losses, owing to weak intergovernmental coordination, especially if preferences for public services are actually quite similar across regions (Tanzi, 1996). A poorly designed or implemented fiscal decentralization could also encourage unsustainable local government borrowing, or the accumulation of arrears. Despite these risks, decentralization has proceeded well in Ethiopia, particularly given the rapid pace of the functional reassignments. The wide diversity in regional income patterns suggests large potential efficiency gains from devolving spending to local governments. Further, subnational governments have not borrowed or accumulated arrears, forestalling a possibly unsustainable rise in the domestic public debt.

58. However, an area that continues to jeopardize macro-fiscal stabilization is the weak overall capacity of the woredas. It remains unclear how effectively these entities can absorb substantially larger budgets over the medium term. During the decentralization transition, policy slippages have been limited by inflexible expenditure composition and budgeting guidelines for the woredas. However, weak public expenditure management (PEM) systems also limit the scope for woredas to manage capital projects, especially projects involving complex donor requirements. As MDG-related donor inflows accelerate, improving this capacity will become an increasingly critical priority. Similarly, capacity constraints in PEM could also affect the efficacy of the rapidly scaled-up Food Security Program, a domestically financed Birr 2 billion (2.6 percent of GDP) program that is mostly transferred to subnational governments with an earmarked share for capital projects to improve agricultural productivity. Although the guidelines for budget formulation are intended as a transitional mechanism to compensate for weak local capacity, realizing the efficiency gains accruing from decentralization will require more autonomous budgeting looking ahead. How the woredas manage increased fiscal autonomy will have implications for macro-fiscal control.

59. Finally, greater local government autonomy through accelerated decentralization does not readily square with the need to implement national economic objectives as identified in the PRSP process. This fundamental policy tension can be pragmatically balanced by requiring woredas to satisfy minimum performance standards. These standards can be established through a mix of budget guidelines, such as spending floors in key poverty-reducing sectors and minimum sectoral performance results, such as student-teacher ratios or health clinics per capita. These performance benchmarks could be augmented with penalties to ensure compliance with the national or regional objective.

C. Public Expenditure Management

Budget formulation

60. Improved budget planning represents a critical reform priority to improve fiscal management and achieve stronger poverty-reduction outcomes. For instance, there are often significant deviations between actual fiscal outturns and the original budget formulation, especially at the regional level. This mixed track record has weakened the reliability of the budget process, and has diminished its effective role as the principal mechanism to channel scarce public resources to high-priority areas. This problem has also been compounded by the fragmented budget structure, characterized by earmarked revenue to finance numerous extrabudgetary funds. The planning process could be improved by adopting several key reforms in the short term, including (i) the urgent need to mandate more rapid reporting by subnational governments, (ii) coordinating with donors to improve estimates of the destination and sectoral composition of grant-financed project spending, and (iii) adapting current institutional structures to improve the budget system, such as linking the budget to a medium-term expenditure framework, and rolling out an integrated financial management information system to the regions.

61. Long delays in reporting in-year fiscal outcomes represents a critical weakness in budget preparation, limiting the opportunities for policy makers to learn from recent experience. Following decentralization, regions and woredas have scrambled to build reporting capacity as each woreda individually prepares and reconciles its financial accounts with varying lags. Inadequate tracking of project spending financed by donor grants represents another problem that has impeded budget preparation and reporting. As a result, the sectoral breakdown of poverty-reducing spending cannot be effectively monitored by budget planners, further hindering the efficient allocation of domestic resources.19 Further, the World Bank estimates that the budget only captures about two-thirds of actual grants20, resulting from valuation problems of in-kind food relief, the disincentive to report grants to regions, and donor reporting in an unusable format. Greater coordination with donors to strengthen the reporting of their activities using a conformable system of budget classification would greatly facilitate planning and budget reliability. As a result, it will be critical to monitor the effectiveness of the forthcoming “donor aid platform”, designed to address these issues.

62. The institutional design of the Ministry of Finance and Economic Development (MoFED) could also be strengthened to enhance budget formulation. For instance, the amount of block grant transfers to regions should be explicitly linked to a medium-term expenditure framework incorporating the inputs of line departments and harmonized with regional governments to ensure consistency. Consistent with this broader aim, MoFED has developed a detailed three-year rolling Public Investment Plan with information available by individual project. Regions are also building capacity in this area.

63. The budget formulation of regions and woredas could also be strengthened by adhering to a fixed budget preparation calendar. Higher levels of government have been slow at times to inform lower-level governments about the final distribution of transfers. In one instance, a costly second round of regional budget planning was required because the federal government delayed a final decision regarding the distribution of block grants.21 Moving to a fixed budget calendar would facilitate an orderly flow of information so that budget planners at all government levels can incorporate changes early in the preparation process. In addition, ensuring a fully consistent chart of accounts with the central government is important to enhance planning and reporting.

64. Budget formulation would be greatly facilitated by rolling out an automated and integrated financial management information system based on double-entry cash accounting to all regions. A significant factor explaining the slow reporting of fiscal results has been the manually intensive procedures currently employed in many regions. As fully integrated financial management systems are rolled out over the medium term, interim homegrown systems have proved to be effective for tracking disbursements in a more user-friendly format for less-skilled staff.

65. Budget formulation had been hindered prior to 2003/04 by incomplete fiscal coverage, particularly the exclusion of numerous extrabudgetary funds that account for about 10 percent of consolidated government expenditure. Although the funds are now covered in the fiscal accounts, the practice of earmarking revenue to finance their activities has impaired the flexibility of the budget to meet shifting spending priorities over time. For instance, surplus proceeds held by the Road Fund cannot be readily reallocated for other pressing social priorities.

Budget execution

66. Budget execution has typically been fairly disciplined in Ethiopia. Corruption has been much less prevalent than in other countries in the region, and the government has succeeded in avoiding expenditure arrears. However, budget execution could be improved by (i) building capacity for the audit and control functions, (ii) clearing the backlog of accounts for audit, and (iii) strengthening cash flow management, the commitments control system, and the procurement system for public goods and services.

67. The first step to improve expenditure control is to delineate the functions of internal and external auditors and the jurisdiction of the central and regional Auditor General offices. Each region and the central government have an Auditor General office that reports to its respective parliament. The federal Auditor General can also examine if block grants have been effectively spent by subnational governments. The auditor generals are responsible for reporting their findings within six months from the time the accounts have been submitted. However, prepared and reconciled accounts can be delayed by over two years from the close of a fiscal year.

68. Achieving more effective internal controls and auditing requires strengthening the procedures at both the line departments of the central government, and the systems of most subnational governments. Realigning salary levels might also be required to attract skilled staff, especially auditors. Further, the central government can step up its interim staffing assistance to regions until local capacity improves. Overall staffing is a critical issue as about half of federal auditors have already been redeployed to the regions, while the anti-corruption agency has also absorbed a number of auditors. An urgent short-term measure to address shortcomings in internal control and audit include the more rapid preparation and dissemination of manuals to assist staff.

69. In addition to the control and audit functions, improved budget systems are needed to improve fiscal management capacity. For instance, the system of expenditure commitments control should be strengthened so that the laudable track record of avoiding expenditure arrears can be maintained. Improving cash management is also a priority to facilitate a more orderly expenditure profile within the fiscal year. As the central government rolls out an automated accounting system based on double-entry cash accounting, the system will be better able to track and control disbursements consistent with a common chart of accounts across government levels. The central government should also adopt an internationally recognized code for procurement, while the Auditor General office should verify that large procurement contracts achieve “value for money” through a transparent process.

D. Revenue Administration

Tax administration

70. Significant progress has already been achieved since 2001, including the establishment of a Large Taxpayers Office (LTO), a new Ministry of Revenue, and the introduction of a value-added tax (VAT) along with a modernized VAT-specific administration. A significantly lower nonfiling rate over the past year reflects stepped-up efforts to improve enforcement. Ethiopia’s relatively high tax ratio for a predominantly agricultural economy implies that future reforms will not be motivated by raising substantially higher revenue. The objective should therefore be to improve revenue-raising efficiency, which will promote private sector development through a more supportive tax environment. In this manner, the tax administration could advance structural reforms by integrating the VAT into the regular apparatus of the tax administration, incorporating greater automation to support the system of self-assessment, and strengthening human resources.

71. Greater automation will be a crucial aspect of improving the administrative efficiency of the current system. A first step should be to extend the use of automated systems employed by the VAT administration throughout the broader tax administration. In this manner, the assignment of taxpayer identification numbers (TINs) to all registered taxpayers should proceed as a priority. In addition, collecting the VAT should be integrated into the regular tax administration, especially the LTO. Other branches of the tax administration should also be unified into a single integrated institution that makes extensive use of automated systems to improve collections, manage tax arrears, and identify nonregistered taxpayers. Greater automation will also support the system of self-assessment by redeploying existing staff that manually double-check returns and supporting documentation to higher value-added activities, such as collection and enforcement. Over the medium term, developing a high-caliber professional staff will facilitate these structural reforms.

Customs administration

72. Further structural reforms of the customs administration can support broader macro objectives, such as facilitating trade growth in a manner compliant with the World Trade Organization and World Customs Organization. Recent structural reforms have already delivered positive results in terms of securing higher revenue. In addition, the time required for goods clearing has declined from about 48 days to under 48 hours. Steps have also been taken to improve human resources through the aggressive recruitment of university graduates and enhanced training of staff. Further, risk assessment for auditing goods in transit has been introduced, offering the potential to curtail smuggling.

73. The critical challenge, looking ahead, will be to foster a stronger system of self-assessment in customs, supported by improved risk assessment and auditing methods. Selective auditing of goods in transit is a clear priority; however, the customs administration should also bolster its tools to assess taxpayers following the release of goods. Greater automation of simplified declaration forms that can handle both the security deposit and the transit of goods will facilitate this process. The expanded use of the various features of UNCTAD’s Automated System of Customs Data (ASYCUDA) to collect and analyze trade data, input declarations, and handle manifests is also a necessary step to improve customs control and underpin the system of self-assessment. Over the medium term, the customs administration can further contribute to macro-fiscal objectives by instituting an effective anti-smuggling system that applies appropriate selection criteria to identify high-risk traders. In light of the porous border, implementing an anti-smuggling program will represent a key measure to improve border control and limit opportunities for an expanded informal economy.

E. Conclusion

74. This section surveyed the main reform priorities associated with the evolving process of fiscal decentralization. Devolved spending mandates should provide long-term efficiency benefits by better matching public spending to disparate local needs, and achieve savings by improving expenditure allocation. However, these potential gains have been offset by the high cost of expanding local institutions to manage decentralized expenditure responsibilities, and the limited budgeting and staffing flexibility of the woredas. As a result, the block grant system should be carefully evaluated to avoid unfunded mandates, especially given the large share of consolidated pro-poor spending undertaken by subnational governments.

75. In addition, advancing the structural reform of PEM represents a critical aspect of the larger initiative to enhance fiscal management. In that regard, improving budget formulation and execution represent critical components of the PEM agenda, looking ahead. Decentralization exacerbated several existing reporting weaknesses and also gave rise to new capacity-building priorities. Key areas for reform include enhancing budget formulation through improved reporting by woredas and regions, greater donor coordination to track project spending, and rolling out financial management information systems.

76. Reforms to the tax and customs administrations should focus on improving revenue-raising efficiency to promote private sector development through a supportive tax environment. Nurturing a strong system of taxpayer self-assessment will require greater automation, and reallocating staff resources to higher value-added activities, such as collection and enforcement. Strengthened risk assessment and taxpayer services will be critical to underpin an improving tax administration over the medium term.

Figure IV.2.
Figure IV.2.

Ethiopia: Block Grants from the Central to Regional Governments

Citation: IMF Staff Country Reports 2005, 028; 10.5089/9781451812749.002.A004

References

  • Tanzi, V., 1996, “Fiscal Federalism and Decentralization: A Review of Some Efficiency and Macroeconomic Aspects”, Annual World Bank Conference on Development Economics, M. Bruno and B. Pleskovic (eds.), pp. 295–316 (Washington: World Bank).

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  • World Bank, 2003, Country Financial Accountability Assessment (Washington).

  • World Bank, 2004, Issues in State Transformation: Decentralization, Delivery, and Democracy, Draft Institutional Governance Review (IGR) Concept Note (Washington).

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  • World Bank, 2003, “Medium-term Trends and Recent Developments in Public Spending (including Statistical Annexes)”, Public Expenditure Review, Volume III. 2002/03, preliminary draft (Washington).

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10

Prepared by Todd Mattina (FAD).

11

This paper is based on discussions with officials, and draws from a number of IMF and World Bank documents, several of which are preliminary.

12

The regions reflect diverse ethnic and socioeconomic areas, including primarily pastoral and nomadic regions that vary in population size by a factor of 50.

13

World Bank. “Issues in State Transformation: Decentralization, Delivery and Democracy”. Draft Institutional Governance (IGR) Concept Note.

14

World Bank, Public Expenditure Review, 2002/03, preliminary draft.

15

World Bank, Public Expenditure Review, 2002/03, preliminary draft.

16

World Bank, Public Expenditure Review, 2002/03, preliminary draft.

17

World Bank, Public Expenditure Review, 2002/03, preliminary draft.

18

World Bank, Public Expenditure Review, 2002/03, preliminary draft.

19

External aid (defined as grant and loan disbursements) represents about 35 percent of consolidated government expenditure on average.

20

World Bank, Public Expenditure Review: Ethiopia, 2002/03, preliminary draft.

21

World Bank, Public Expenditure Review, 2003/04, preliminary draft.

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Cover IMF Staff Country Reports
The Federal Democratic Republic of Ethiopia: Selected Issues and Statistical Appendix
Author: International Monetary Fund
Volume/Issue:
Volume 2005: Issue 028
Publisher:
International Monetary Fund
ISBN:
9781451812749
ISSN:
1934-7685
Pages:
89
DOI:
https://doi.org/10.5089/9781451812749.002
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    Ethiopia: Block Grant as a Share of Federal and Regional Spending, 1998/99-2002/03

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    Ethiopia: Block Grants from the Central to Regional Governments

Ethiopia: Block Grant as a Share of Federal and Regional Spending, 1998/99-2002/03

Ethiopia: Block Grants from the Central to Regional Governments