Assessing the Impact of Fiscal federalism on Equitable development in Ethiopia: The Case of Water-Sector Development

Abstract

After gaining control of state power in 1991, one of the reform agendas of the Ethiopian People’s Revolutionary Democratic Front (EPRDF) was the introduction of fiscal federalism in order to bring equitable development and durable peace to Ethiopia. After two-and-a-half decades, though, there are widely held concerns about equitable development across regions. By understanding potable water as one of the pro-poor sectors, this article aims to investigate the impact of fiscal federalism on equitable development in Ethiopia. To achieve this aim, the study applies a mixed-research approach combining qualitative and quantitative econometrics. Primary as well as secondary sources of data have been utilised. Primary data were collected through in-depth interviews with key informants; secondary data were collected from literature, government reports, legal documents, and minutes. Additionally, coefficients of correlation and Gini coefficients were used to measure relationships and disparity, respectively. The findings indicate that there is a statistically significant relationship between fiscal arrangement and equitable development in Ethiopia. This is proved through the statistical analysis made of the potable water sector. Despite a growing trend in all aspects of socio-economic developments over the last ten years in Ethiopia (2008/9 to 2018/19), progress in water-sector development is not equitable among the regional states, with regions showing significant variation in their emphasis on their achievements and their development outcomes. This study contends that Ethiopia’s fiscal decentralisation policy has brought adequate equitable development among the regional states in the Ethiopian federation. There is, therefore, a need for concerted action to reduce the inter-regional water-access gap without compromising efficiency to fulfil each individual’s right of equal access to government-provided services, as stipulated in the Federal Constitution of Ethiopia.