fiscal decentralization and public subnational financial.pdfVIP

WP/06/120 Fiscal Decentralization and Public Subnational Financial Management in Peru Ehtisham Ahmad and Mercedes García-Escribano © 2006 International Monetary Fund WP/06/120 IMF Working Paper Fiscal Affairs Department Fiscal Decentralization and Public Subnational Financial Management in Peru Prepared by Ehtisham Ahmad and Mercedes García-Escribano1 May 2006 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. There is increasing interest in fiscal decentralization in Peru as a mechanism to generate more involved decision-making at the subnational level. This is tempered with a continuing emphasis on overall fiscal stability. However, considerable work needs to be undertaken to define more clearly expenditure responsibilities and financing mechanisms that increase local accountability. In addition, a more transparent fiscal transfer system is needed, together with clarity in expenditure management at all levels of government. The paper suggests that a substantial work agenda is needed to extend the decentralization process with greater transparency. JEL Classification Numbers: H20, H77 Keywords: Fiscal policy, intergovernmental fiscal relations Author(s) E-Mail Address: eahmad@imf.org; mgarciaescribano@imf.org 1 We are grateful t