ABSTRACT
Fiscal decentralization has been considered as a component of human well-being and therefore, an end in itself. It is expected to achieve efficient allocation of resources, improve governance, accelerate economic growth, reduce poverty, achieve a gender balance, and empower weaker sections of society. The argument for decentralization is based on a notion that it will necessarily result in more efficient delivery of public services irrespective of the institutional setting, or capacity of the institutions and economic environment in which they are rooted. Empirical evidence suggests important preconditions for decentralization, and there is much to be done to create appropriate conditions for fiscal decentralization to be successful in achieving its objectives. Tanzi (1996) cautions us that even in achieving allocative efficiency, a number of preconditions must be met for the decentralization to be successful. More stringent requirements are needed in regard to achieving effective macroeconomic stabilization and desired redistribution, especially in developing and transition countries.
