Intergovernmental Fiscal Transfers in Asia: Current Practice and Challenges for the Future

Abstract

The new focus on the greater fiscal role by local governments has been supported by international development agencies including ADB. ADB has stepped up its assistance for regional development projects in relation to increasing economic and political decentralization in its member countries. At present, fiscal strengths of subnational governments are assuming even greater importance in the operations of ADB as it places the emphasis of its operations on poverty reduction and the participation of local stakeholders, including local communities and low-level governments, in its projects and programs. This operational shift has been strengthened by a significant increase in loans and technical assistance to address poverty, education, health, regional development, and environment. All of these require sound backup of fiscal resources, covering both capital and recurrent expenditures, from subnational governments as well as their enhanced institutional capacity.