Fiscal Decentralisation is one of the key public financial management reform initiatives embarked upon by Ghana over the past decades to facilitate national development in a bottom up manner.
a) Explain the concept of Fiscal Decentralization. (4 marks)
View Solution
The Government of Ghana (GoG) in 1988 embarked upon the implementation of a comprehensive decentralization policy and local government reform program aimed at establishing efficient decentralized government machinery as a means to provide strong support for participatory development. This was further given a boost by Chapter 20 of the 1992 Constitution. Article 240 (1) of the Constitution provides that, ‘Ghana shall have a system of Local Government and administration, which shall as far as practicable, be decentralized’. The Constitution further provides that:
- Parliament shall formulate laws to enhance the capacity of Local Government Authorities to plan, initiate, co-ordinate, manage and execute policies in respect of matters affecting the local people within their areas.
- There shall be established for each Local Government unit a sound financial base with adequate and reliable sources of revenue.
- To ensure accountability of Local Government authorities, people in particular local government areas shall, as far as practicable be afforded the opportunity to participate effectively in governance.
In order to operationalise the above, the Local Government Act, 1993 (Act 462) was passed to outline in practical terms the political, administrative and fiscal mandates of the Metropolitan, Municipal and District Assemblies (MMDAs) in their areas of jurisdiction.
Act 462 seeks to establish decentralized administration through the transfer of power, authority, functions ,competence and means from the Central Government Ministries, Departments and Agencies (MDAs) to local government (LG) units, specifically i.e the Metropolitan, Municipal and District Assemblies (MMDAs) for improved service delivery to people.
In Ghana, Fiscal Decentralization seeks to ensure the transfer of adequate financial resources from central Government to Local Governments with sufficient autonomy to allocate these resources in the provision of socio-economic services.
b) Enumerate FOUR (4) factors that underpin successful Fiscal Decentralization in Ghana as a public sector financial management and public administration tool. (8 marks)
View Solution
i. Management Of Devolved Financial Resources
- Provision of local services;
- Level of local taxation and revenues (rates, fees, fines);
- Government’s ability to finance other projects, especially capital projects;
- Resource mobilization.
ii. Public Accountability And Public Budgeting
- Resource allocation;
- Public debates or stakeholder consultation;
- Administrative /organisational system.
- Answerability to communities.
iii. Financial And Budgetary Control
- Compliance to financial rules, laws and objectives of organization;
- Effective and efficient expenditure management;
- Judicious use of MMDA funds and other resources;
- Safeguarding of assets of assembly;
iv. Political Empowerment
- Administrative control;
- Capacity building;
- Economic development (local and national);
- Full complimentary and timely financial support by central government, donor;agencies, NGO’s, etc.