This article addresses the question of why Ethiopia's post-1991 decentralisation reform is not taking the desired direction of matching diverse needs with available resources and creating accountable, responsive and autonomous regional governments. Given regional governments' relatively diverse socio-economic positions, the intention of the reform to create autonomous regions with devolved administrative, fiscal and political power is appropriate. Nonetheless, the implementation of the elements of the reform – expenditure assignment, revenue assignment, intergovernmental fiscal transfer and sub-national borrowing – is flawed. Existing studies that question the effectiveness of Ethiopia's devolution focus on political or fiscal aspects, and fail to link the de facto centre-region political power relationship with intergovernmental fiscal relations. This article, based on detailed field research in three regional governments, argues that the flawed intergovernmental fiscal relations reform is best explained by the clientelistic relationship between central and regional political parties.
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