Fiscal decentralisation and provincial level service delivery in Sri Lanka: An econometric analysis

Abstract

AbstractThe introduction of Sri Lanka's Provincial Councils has been a part of the country's efforts to decentralise its political, administrative and fiscal powers to the local governments since 1987. One primary reason for the debates on decentralisation is the non‐existence of quantification of the impacts of fiscal decentralisation on the local governments’ service delivery. This study aims to quantify the effects of fiscal decentralisation on Sri Lanka's service delivery using time‐series data from 1988 to 2018. This investigation employs the Autoregressive Distributed Lag (ARDL) modelling approach and uses a broad range of secondary data. The widely used ARDL modelling approach provides fiscal decentralisation's short‐run and long‐run impact. The results reveal that fiscal decentralisation has had either insignificant or unexpected short‐ or long‐term effects on primary school enrolment and human development index. According to these results, it may be concluded that sufficient fiscal decentralisation has not taken place to provide the necessary funds to improve service delivery. The policymakers should consider restructuring the expenditure and revenue structure of the Provincial Councils. Finally, greater coordination is required between the central government and Provincial Councils in implementing decentralised activities.