Financial Decentralization

Fiscal Decentralization in Jordan:

Reframing the debate and discussing the parameters of an intergovernmental transfer formula for Governorates.

Summary

Decentralization has been on the Government of Jordan’s agenda for more than fifteen years. However, a close examination of the political discourse reveals three features that warrant further analysis. First, there is no clear distinction between the political, fiscal and administrative aspects of decentralization and the sequence by which they should occur. Second, more emphasis has been paid to aspects of administrative decentralization, rather than to the transfer of political power and financial resources from the central government to governorates needed to increase transparency and accountability, as well as the autonomy and capacity of subnational governments. Third, the little that has been written about the autonomy of governorates does not adequately consider the need for an intergovernmental transfer system to allocate national revenues to subnational governments. Drawing from fiscal decentralization experiences in other countries, and from the specific historical and institutional context of Jordan, this article constitutes the first attempt to model capital transfers and to discuss the parameters of an intergovernmental transfer formula. The results show that a more comprehensive and appropriately structured mix of transfer decision criteria can help mitigate the ambiguity of Jordan’s transfer policy. This includes changing the weights of some current transfer criteria and factoring in new ones.