Journal of Research in International Business and Management

Journal of Research in International Business and Management (JRIBM) (ISSN: 2251-0028) Vol. 4(3) pp. 64-73, May, 2014. DOI: http:/dx.doi.org/10.14303/jribm.2014.016. Copyright © 2014 International Research Journals

 

Full Length Research Paper

Fiscal decentralization, donor aid and capacity building: empirical experiences from Uganda

Juma Teko and Isaac Nkote

Department of Finance, Makerere University Business School

*Corresponding authors e-mail: jteko@mubs.ac.ug

Abstract

 

Fiscal Decentralization can contribute to the improvement in the country’s’ overall fiscal position and local governments’ own fiscal position. Decentralization enhances resource mobilization, including donor aid. Decentralization has not necessarily brought in better capacity and donor aid. The study investigated the relationship between Fiscal Decentralization, Donor Aid and Capacity Building in Mbale district, Uganda. The study focused on Fiscal Decentralization, Donor Aid and Capacity Building of Local Governments. The forms and evaluation of Fiscal Decentralization was studied. The reasons for giving Aid and its benefits to recipients also comprised the study.  A cross-sectional correlation survey design was used in the study. Questionnaires were used to collect data about fiscal decentralization, donor aid and capacity building. The target Population was composed of Councilors and Civil Servants at the different levels of Local Government. The target respondents included 82 LCIII Councilors, 45 LCV Councilors, 28 Sub County Chiefs and 5 Heads of Department at the district. The total population was 160. Pearson’s correlation coefficient was used to determine the degree of relationship between Fiscal Decentralization, Donor Aid and Capacity Building Findings indicate that Fiscal autonomy and Intergovernmental transfers explain 35% of Fiscal Decentralization. Further, Fiscal Autonomy is more dominant (19%) and Intergovernmental Transfers less significant (16%). There is a significant positive relationship between Fiscal Decentralization and Donor Aid (r = 0.598**, p ≤ 0.01). Similarly there was a significant positive relationship between Fiscal Decentralization and Capacity Building (r = 0.452**, p ≤ 0.01). There was also a significant positive relationship between Donor Aid and Capacity Building (r = 0.540**, p ≤ 0.01). The study posits that there can be better donor aid if fiscal decentralization is implemented well. Further, if more fiscal powers are devolved to local governments, Capacity Building will be enhanced. With more Donor Aid flowing to the local government levels, Capacity Building will be enhanced. 

Keywords: Decentralization, Fiscal decentralization, Donor aid, Capacity building, Local government

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