Subnational Fiscal Autonomy in a Developmental State: The Case of Ethiopia

Abstract

Due to different factors, federations exhibit significant variation in their respective forms, natures and degrees of decentralization. Regardless of these differences, however, the necessity of a federal covenant, which bestows genuine autonomy on subnational governments, is not contested. Indisputably, a mere constitutional stipulation does not guarantee the financial autonomy of sub-national governments as the latter is influenced by the political economy narratives of a government. Though the fallings of Ethiopian “developmentalism” on the effective functioning of the federal system are multifaceted, this article scrutinizes its impact on the fiscal (tax) autonomy of subnational governments. Looking at the contemporary “developmental-oriented” measures of the federal government vis-à-vis the constitutionally dictated autonomy of regions to generate own-source revenue, the article argues that the fiscal autonomy of subnational governments is highly constrained due to the adoption of the developmental state paradigm.