The House of Federation (HoF) finalized a study to establish an independent commission which will manage the revenue sharing process between the federal and regional governments.
The new institution, which may be called the “Grant Commission” or “Budget Commission,” is designed to endure regime changes and operate free of political affiliations.
The recommendation to establish the new commission came after the House conducted a study to identify gaps in the existing revenue sharing formula.
According to Wakitole Dadi, director of Regional States Fiscal Equalization department at the HoF, the study, which is carried out by a foreign consultant, identified revenue potential of regional states in Ethiopia.
According to the study, unfair resource distribution is a major reason behind rising conflict in Ethiopia.
“The study suggested a Grant Commission must be established to oversee resource distribution management and fiscal transfer reform independently. Currently, there is a directorate in HoF but it cannot be free of politics,” said Wakitole, adding, “The Commission will be a think-tank equipped with high professionals.”
The independent institution is necessitated, manly to avoid reshuffles in subsidy policy every time a new political party comes to power.
Presidents of regional states, who are members of the Standing Committee on Budget and Revenue sharing, agreed to establish the independent commission. The next step is to await for approval from the HPR and introduce directives and regulations needed to establish the commission.
HoF, which approved the recommendation to establish the Grant Commission, has already requested the World Bank to support the establishment of the new commission.
“Our study indicated there is a growing disparity among regional states, regarding development. If it is necessary, we will table the agenda of revenue sharing and necessity of the commission, to the upcoming national dialogue,” said Wakitole.
The Commission will allow regional states to access loans from the federal government and devise mechanisms for regional states source of development financing, other than federal subsidy. So far, regional states cannot access external loan.
The House is currently crafting a new budget sharing formula, which will be implemented after two years. According to Wakitole, The current revenue sharing formula, which is implemented beginning 2020/21, will stay in place only for the next two years.
