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Fiscal Transfers in Asia: Challenges and opportunities for financing sustainable development at the local level

Aug 30, 2019

Much of the public expenditure critical for achieving the Sustainable Development Goals (SDGs) – such as expenditures on rural roads, irrigation, health and education – is managed locally by subnational governments (SNGs). Due to the low own-source revenue capacity of most subnational governments, fiscal transfers from central governments are essential for making these expenditures possible and thus for making progress to achieve the SDGs. The resourcing, design and administration of the various fiscal transfer instruments, the way they are allocated across SNGs, and the way they incentivize subnational governments all matter greatly for achieving the SDGs.  

This report summarizes experiences in fiscal transfers in Asia and makes key recommendations to help improve these areas:

  • Resourcing of fiscal transfers
  • Design of fiscal transfers
  • Administration of fiscal transfers
  • Making expenditures more equitable across SNGs
  • Positive performance incentives for SDG-related service delivery

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