Alternative Simulations of Equalization Transfers in Sudan

NourEldin Maglad and Eisa Elshwin ()
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Eisa Elshwin: Peace University, Sudan

No 1029, Working Papers from Economic Research Forum

Abstract: Federal transfers in the Sudan are key to reducing regional disparities and addressing marginalization. While more resources have been directed to the sub-national levels since the adoption of the federal system in 1991, the lack of transparency and predictability surrounding these transfers has undermined the role of federal transfers to promote regional convergence and reduce financial inequality. The goal of this study is to suggest alternative simulations of equalization transfers using both fiscal needs and fiscal capacity to fill the fiscal gap so as to mitigate the disparities among states. Therefore, four intergovernmental equalization transfers scenarios were proposed using the fiscal gap approach. The results of the simulation and Lorenz curve ranking and Gini Coefficient index suggest that the government should base the transfer program on the fiscal gap measured by the difference between states fiscal needs, proxied by an augmented state needs index, and the state fiscal capacity, proxied by a poverty index. This recommended scenario would reduce the fiscal inequality among the state to its narrowest.

Pages: 26
Date: 2016-07, Revised 2016-07
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