Decentralization and fiscal management in Colombia

William Dillinger and Steven B. Webb

No 2122, Policy Research Working Paper Series from The World Bank

Abstract: Colombia's political geography contrasts sharply with its economy. Physical characteristics and guerilla war fragment the country geographically, yet it has a long tradition of political centrism and macroeconomic stability. Recently, with political and economic decentralization, there has been some weakening of macroeconomic performance. The authors explore institutional arrangements that have helped Colombia manage the fiscal aspects of decentralization, despite the country's political problems. Fiscal decentralization proceeded rapidly in Colombia. Education, health, and much infrastructure provision have been decentralized to the departmentos and municipios. Decentralization has led to substantial but not overwhelming problems, both in maintaining fiscal balance nationally ( as resources are transferred of subnational levels) and in preventing unsustainable deficits by the subnational governments. The problems have arisen because central government interference prevents departments from controlling their costs and because of expectations of debt bailouts. Both are legacies of the earlier pattern of management from the center, and some recent changes - especially about subnational debt - may improve matters. Colombia's traditional political process has had difficulty dealing with problems of decentralization because traditional parties are weak in internal organization and have lost de facto rule over substantial territories. The fiscal problems of subnational government have been contained, however, because subnational governments are relatively weak politically and the central government, for the time being, has been able to enforce restrictions on subnational borrowing.

Keywords: Urban Economics; Banks&Banking Reform; Public Sector Economics&Finance; Municipal Financial Management; Public&Municipal Finance; Banks&Banking Reform; National Governance; Public Sector Economics&Finance; Municipal Financial Management; Urban Economics (search for similar items in EconPapers)
Date: 1999-05-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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