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Decentralization and fiscal management in Colombia

Author

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  • Dillinger, William
  • Webb, Steven B.

Abstract

Colombia's political geography contrasts sharply with its economy. Physical characteristics and guerilla war fragment the country geographically, yet it has a long tradition of political centrism and macroeconomic stability. Recently, with political and economic decentralization, there has been some weakening of macroeconomic performance. The authors explore institutional arrangements that have helped Colombia manage the fiscal aspects of decentralization, despite the country's political problems. Fiscal decentralization proceeded rapidly in Colombia. Education, health, and much infrastructure provision have been decentralized to the departmentos and municipios. Decentralization has led to substantial but not overwhelming problems, both in maintaining fiscal balance nationally ( as resources are transferred of subnational levels) and in preventing unsustainable deficits by the subnational governments. The problems have arisen because central government interference prevents departments from controlling their costs and because of expectations of debt bailouts. Both are legacies of the earlier pattern of management from the center, and some recent changes - especially about subnational debt - may improve matters. Colombia's traditional political process has had difficulty dealing with problems of decentralization because traditional parties are weak in internal organization and have lost de facto rule over substantial territories. The fiscal problems of subnational government have been contained, however, because subnational governments are relatively weak politically and the central government, for the time being, has been able to enforce restrictions on subnational borrowing.

Suggested Citation

  • Dillinger, William & Webb, Steven B., 1999. "Decentralization and fiscal management in Colombia," Policy Research Working Paper Series 2122, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2122
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Elio Londero, 2005. "'Market Discipline', Lending Ceilings and Subnational Finance," Kyklos, Wiley Blackwell, vol. 58(4), pages 575-590, November.
    2. Fabio Sánchez Torres & Michael Smart & Juan Gonzalo Zapata Giraldo, 2002. "Intergovernmental transfers and municipal finance in Colombia," INFORMES DE INVESTIGACIÓN 002915, FEDESARROLLO.
    3. Eifert, Benn*Gelb, Alan*Borje Tallroth, Nils, 2002. "The political economy of fiscal policy and economic management in oil exporting countries," Policy Research Working Paper Series 2899, The World Bank.
    4. Faguet, Jean-Paul, 2014. "Decentralization and Governance," World Development, Elsevier, vol. 53(C), pages 2-13.
    5. Leonardo Bonilla-Mejía & Iván Higuera-Mendieta, 2017. "Political Alignment in the Time of Weak Parties: Electoral Advantages and Subnational Transfers in Colombia," DOCUMENTOS DE TRABAJO SOBRE ECONOMÍA REGIONAL Y URBANA 015746, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
    6. Ana María Iregui & Jorge Ramos & Luz Amparo Saavedra, 2001. "Análisis De La Descentralización Fiscal En Colombia," BORRADORES DE ECONOMIA 001984, BANCO DE LA REPÚBLICA.
    7. World Bank, 2002. "Cali, Colombia : Toward a City Development Strategy," World Bank Publications, The World Bank, number 14086, November.
    8. Diego E. Pinilla & Juan de Dios Jiménez & Roberto Montero, 2015. "La descentralización fiscal en América Latina. Balance de un proceso," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(33), pages 133-160, July-Dece.
    9. Gerardo Villa, 2005. "Reseña sobre el ajuste fiscal territorial después de la Constitución de 1991," ENSAYOS SOBRE ECONOMÍA REGIONAL (ESER) 003458, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.

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