Spatial variations in the fiscal capacity of local government in Ghana, before and after decentralisation

This study examines the impact of decentralisation reforms on variations in the fiscal capacity of Ghana's district councils/assemblies. Local governments in the capital city region and in the second-largest metropolitan area were the most financially sound, whereas those in remote regions and rural areas were found to be the least financially sound. The early years of structural adjustment were associated with growing disparities, including the impact of the regressive central grants. However, the fiscal centralisation that accompanied decentralisation reform has reversed this trend. Central grants did not favour the poorer districts, but the disparities in grant allocation were far narrower than the disparities in self-generated revenues, and so a large increase in grants has contributed to the reduction of disparities.