Devolution in Zimbabwe: Exploring Factors Underpinning Fiscal Equalisation

Abstract

Overlooking fiscal devolution often renders other dimensions of decentralisation ineffective, as sub-national governments require adequate financial resources to fulfil their delegated mandates. Without a balance between financial resources and responsibilities, it becomes nearly impossible for sub-national governments to execute their assigned functions. The golden rule of decentralisation states that funding should follow the devolved functions and responsibilities. Beyond the mere transfer of resources and responsibilities, devolution is supported by the allocation of fiscal resources to drive people-centred local development. A budgetary procedure aligned with the devolution framework must accompany devolution process. The central argument in the article is that fiscal imbalances in Zimbabwe demand a robust and sustainable intergovernmental fiscal model as the central government retains control over the most lucrative sources of revenue, despite implementing various decentralisation reforms. To address these imbalances, locally generated revenue must be supplemented through revenue-sharing or intergovernmental fiscal transfers, as provided for in the Zimbabwe 2013 Constitution. A well-structured fiscal equalisation model framework can enhance the financial sustainability of sub-national governments by considering key variables such as the poverty index, the population of the area, the size of the local economy and the estimated value of the natural resource endowments.