Fiscal Decentralization and Fiscal Autonomy in Tanzanian Local Government Authorities: A Review of Existing Literature and Empirical Evidence

Local governments are very important in providing public social service, such as water, health, education and road infrastructures to citizens. In order to ensure efficient provision of these public services, local governments need to be having strong mechanism of governance. Fiscal decentralization in relation to the local government is considered as an important means of the system of governance. Local government authorities collect roughly five percent of all public revenues and are accountable for about twenty percent of public spending. With the understanding of the significant role of local governments, policy and decision makers need to ensure strong and stable local financial management system. Also, strong efforts need to be directed to internal revenues mobilization. Principally, local government recurrent expenditure is supposed to be covered by local government’s internal revenues but surprisingly more than ninety percent of the same is covered by inter-governmental transfers which in one way or another might interferes fiscal autonomy of the local government. Decision and policy makers are argued to enhance sources of revenues in local governments to enable them to bridge fiscal vertical gap between revenue generated and total local recurrent expenditure. Also proper designing of local government fiscal policy should take into account the component of inter-governmental transfers. Keywords: Fiscal Decentralization, Fiscal Autonomy, Local Government, Social Services, Inter-governmental Transfer