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 fiscal regime was extremely coercive and led to distortions in resource allocation.

Fiscal Federalism in the Ethiopian Ethnic-based Federal System

There is an increasing dependency on foreign trade, especially import, taxes in recent years. The significance of the residual power is that the regional states can exercise legislative power over matters not specified in the constitution. Nonetheless, the financial and manpower resources of the regions are very limited.

However, both political imperatives and changes in the overall economic policy of the country opened the door for fiscal policy innovation. The theory of fiscal federalism does not provide fiscal federalism in ethiopia clear-cut separation of fiscal responsibilities that would promote economic efficiency and resource distribution.

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 fiscal federalism in ethiopia parties would influence the decision making power of the other and its effective tax base.

The amendment in the tax codes, devaluation and gradual depreciation of the exchange rate, elimination of taxes on exports except coffee dutiesand the privatization process have had important implications on the amount and structure of government revenue.

The TPLF-led government that replaced the Dergue has redrawn the political map of the country and adopted ethnic based federal structure of government. The final section makes concluding remarks and highlights areas for policy action.

This behavior of excessive spending left an average fiscal gap of about 10 percent. Fiscal federalism in ethiopia government revenue apparently has been barely enough to cover recurrent government expenditure let alone to generate resources for financing capital expenditure.


The Constitution also guarantees borrowing right of the states.


A closer examination of ethiopix main features of the fiscal system suggests that both factors play a role in the process. Collectively, the regional states are granted fiscal federalism in ethiopia status of a nation. In lieu of an abstract, here is a brief excerpt of the fiscal federalism in ethiopia In a federal system, there could be some measure of inequality between the regions, i.

Contact Contact Us Help Feedback. Moreover, as long as there is close relation between the benefits from public services and taxes on the local taxpayers, there is additional incentive to utilize resources efficiently and cost effectively.

The main argument is that local governments are closer to the local population and can identify their choice and preferences better than the central government.

Wolf Legal Publishers : Fiscal Federalism in the Ethiopian Ethnic-based Federal System

The president has a fiscal federalism in ethiopia role. It is not therefore surprising fiscal federalism in ethiopia by62 of 75 developing nations had embarked on one form of decentralization or another. The theory of fiscal federalism addresses three issues related to fiscal decision-making: Powers of etihopia regional chiefs started to diminish at the turn of the nineteen century and had been completely abolished in the early twentieth century.

Accordingly, each regional government includes a State Council the highest organ of state authority and a State Administration highest organ of executive power. The constitutional provisions define the framework within which decision-making would be exercised and establishes the vertical and horizontal structures that find meaning within the prevailing socio-economic environment of the system.

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

This behavior of fiscal spending also affected the macroeconomic situation in which fiacal expenditure run in excess of domestic production. These include administering land and other natural resources in keeping with Federal laws, formulating and execution economic, social and development policies, strategies and plans fiscal federalism in ethiopia the state in question. Ethnical conflicts and boarder ethipoia are referred to the House of Federation.


The current fiscal system fedefalism Ethiopia features some fiscal federalism in ethiopia from the previous systems and striking continuities in fiscal federalism in ethiopia structure and essential elements of fiscal performance of the economy.

Some countries implemented fiscal decentralization whereas others opted for de-concentration of centralized decision making without actual fiscal decentralization. Considerable political and administrative powers have been devolved to the states.

Beyond the “unrestricted right to administer itself”, self-determination also includes proportional representation at federal organs. These factors give rise to a third issue of the relative size of the public sector in the national economy.

In fact, fiscal federalism is a general normative framework for assignment of functions to the different levels of government and appropriate fiscal instruments for carrying out these functions. The fiscal federalism in ethiopia of all these powers to the States are political preferences of the ethnic-based political forces for having strong states. Consequently, health, security, and agricultural development and similar other matters seriously demand that the pertinent Federal and State fiscal federalism in ethiopia organs work in close collaboration.


The post period witnessed the introduction fiscal federalism in ethiopia an unprecedented political structure in the modern history of Ethiopia.

Moreover, the structure of the fiscal federalism in ethiopia system shares important features with other underdeveloped economies in terms of reliance on indirect taxes, dependency on international trade taxes, and persistent fiscal deficits.

The fiscal system of Ethiopia has historically been characterized by high centralization and concentration of fiscal decision-making power at the center. The nature and structure of the economy, the resulting tax bases, the excessive dependence on international trade taxes and external grants, and persistent deficits all contribute to the prevailing features of the fiscal sector as do the fiscal policy stance of the government.