2014年-世界发展银行全球_Kyrgyz_Republic_Public_Expenditure_Review_Policy_Notes___Intergovernmental_Fiscal_Relations_34页_1mb

Kyrgyz Republic - Public Expenditure Review: Intergovernmental Fiscal Relations

Executive Summary

The Kyrgyz Republic has made progress in intergovernmental fiscal relations over the last decade, with policy changes generally aligned with the recommendations from the 2004 Public Expenditure Review (PER). These reforms have aimed to create a more transparent and equitable system of local government financing. Key developments include:

• Uniform revenue retention rates for shared taxes across all tiers of local government.
• Transition of education categorical grants to per student expenditure norms, followed by a centralized per capita model in 2014.
• Use of means-tested matching rates for capital grants and objective indexes for equalization grants based on expenditure needs and revenue capacity.

Despite these advancements, challenges remain in achieving effective decentralization. Issues include:

• Ambiguity in expenditure responsibilities, which are largely informal.
• A bias toward operating (protected) expenditures and soft budget constraints for municipalities due to gap-filling transfers and limited revenue-raising powers.
• Complex and historically based grant allocation formulae that lack transparency and do not reflect current service delivery costs.
• Inefficient service delivery due to the small size of aiyl okmotus and the lack of flexibility in service provision models like inter-municipal cooperation and outsourcing.

The report proposes several policy recommendations, including:

• Developing a comprehensive policy document to clarify the role of local governments and their expenditure responsibilities.
• Broadening local revenue autonomy by allowing local governments to set different tax rates in cities.
• Using per capita (or per client) expenditure needs in equalization grants to improve transparency.
• Combining non-educational services under a single composite expenditure norm and using separate norms for cities if necessary.
• Assessing local revenue capacity using objective indicators rather than historical projections.
• Establishing a redistribution fund for national taxes allocated to aiyl okmotus to reduce revenue volatility.
• Reducing reliance on ad hoc transfers and increasing the use of predictable, formula-based grants.

Context for Intergovernmental Fiscal Relations

The Kyrgyz Republic's intergovernmental fiscal relations are based on a mix of the Soviet Union's administrative structure and recent modifications. The country has a five-tier administrative structure, which was reformed in 1996 to introduce genuine local self-government over the sub-raion tier. Until 2012, raions and sub-oblast cities had a hybrid form of government, with elected councils but centrally appointed officials for execution. After 2012, with the adoption of the 2010 Constitution and the 2011 Local Self-Government Act, city councils gained the authority to select their executive heads, and raions became de-concentrated arms of the national government.

The current legal framework outlines the roles of local councils and executives, but it lacks a clear delineation of responsibilities between the tiers of government. The 2011 Law on Local Self-Government largely repeats the previous list of local functions without significant changes, and the Budget Law (No. 78, Art. 37) assigns responsibility for frontline service delivery units to local governments without clarity on how to manage these functions.

Delineation of Expenditure Responsibilities

The functional classification of subnational expenditures shows that education and public administration account for three quarters of subnational spending. Over half of subnational budgets are spent on personnel, including salaries and payroll charges. A significant portion of expenditures (16%) is categorized as "purchases of unclassified services," often found in aiyl okmotus budgets, where up to 30% of spending is reported in this category.

The legal framework does not provide a clear assignment of responsibilities for core functions. Instead, responsibilities are centered around facilities rather than functions, and the division of responsibilities is based on the current distribution of "social assets" rather than a clear functional delineation. This leads to a lack of clarity in the shared responsibilities between central and local governments, particularly for activities where both levels are jointly responsible.

The education law, for example, gives local governments the authority to expand, maintain, and fund schools and provide free textbooks, but does not assign responsibility for staff retrenchment or school closures. This lack of clarity limits the ability of local governments to manage education as a system rather than individual schools.

Revenue Assignment

The current system assigns various revenue sources to different tiers of government. Local governments are responsible for some taxes, including land and property taxes, and are allowed to set tax rates and exemptions. However, the assessment of local revenue capacity is based on projections rather than objective indicators, which may not reflect actual revenue potential.

The report emphasizes the need to improve the transparency and accuracy of revenue capacity assessments for local governments, using more objective measures to guide funding allocations.

The System of Transfers

The system of intergovernmental transfers includes categorical grants, equalization grants, matching (incentive) grants, and mutual settlements. Categorical grants are used for specific services, such as education, while equalization grants aim to balance revenue disparities. Matching grants are means-tested, and mutual settlements involve gap-filling transfers during budget execution, which contribute to soft budget constraints.

The report suggests simplifying and rationalizing the formulae for grant allocation to better reflect current service delivery costs and to reduce volatility in local revenues. It also recommends reducing the reliance on ad hoc transfers and increasing the use of predictable, formula-based grants.

Subnational Public Investments and Borrowing

Subnational public investments and borrowing are important aspects of fiscal decentralization. However, the current system lacks a clear framework for managing these activities, which can lead to inefficiencies and limited accountability.

The report highlights the need for a more structured approach to subnational public investments and borrowing, ensuring that these activities are aligned with the broader goals of fiscal decentralization and service delivery improvements.

Key Recommendations

• Develop a strategic policy document to clarify the role of local governments and their expenditure responsibilities.
• Broaden local revenue autonomy by allowing local governments to set different tax rates in cities.
• Use per capita expenditure needs in equalization grants to improve transparency.
• Combine non-educational services under a single composite expenditure norm and consider separate norms for cities.
• Assess local revenue capacity using objective indicators rather than past projections.
• Establish a redistribution fund for national taxes allocated to aiyl okmotus to reduce revenue volatility.
• Reduce ad hoc transfers and increase reliance on predictable, formula-based grants.

Conclusion

The Kyrgyz Republic has made strides in intergovernmental fiscal relations, but challenges remain in achieving effective decentralization. A comprehensive and coherent policy framework is needed to clarify expenditure responsibilities, improve revenue autonomy, and enhance the transparency and predictability of intergovernmental transfers. The recommendations provided aim to address these issues and support more efficient and accountable local governance.