Author: Jimmy ChuluPublisher:
ISBN:
Category :
Languages : en
Pages : 10
Book Description
In most developing countries, the local government budget is required by law to be balanced thus the revenues equal to the expenditures in a fiscal year. It follows that the revenues should be sufficient to avert possible revenue shortfalls during the fiscal year. There is a tendency among local governments to over-estimate unrealistic revenues as a way of balancing their budgets even when it is best known that the potential revenues are not attainable. Similarly, local governments are faced with a serious fiscal gap to balance the revenues against expenditures due to the declining revenue capacity in developing countries. This is not to suggest that all local governments especially those in developed economies lack such capacity as it is often dependent on the degree of revenue autonomy.In practice, local governments in developing countries over four (4) decades now continue to experience a vertical and horizontal imbalance meaning that the budgeted and actual spending does not tally. Therefore, own revenue capacity is a key cornerstone of fiscal discipline in local government budgeting. Typically, most local government budgets in developing countries do fail to achieve the revenue set targets and are often balance their budget mathematically. In this case, the execution of the budget is merely an accounting function which is unpredictable and very hard to implement. It is always argued that a budget deficit is not accepted at local level in order to enhance fiscal discipline of the revenue side and expenditure side of the budget. It is in rare circumstance where the anticipated revenues exceed the projected expenditures for the fiscal year. In developing countries where there are adopted laws that require the local government budget to be balanced have recorded a vicious circle of declining budget performance because there are not realistic in real terms.
