An autonomous research institute under the Ministry of Finance


Strengthening Fiscal Decentralisation in Sri Lanka

Publication date

Jan, 2008


Report submitted to the Government of Sri Lanka


M. Govinda Rao, Tapas Kumar Sen, R. Kavita Rao, D. K. Srivastava


The study deals with decentralisation in Sri Lanka primarily with respect to provincial councils, the second tier of government. It examines the pattern of expenditures and their financing at the provincial level, the assignment of revenue (tax) handles, and the system of intergovernmental transfers in order to provide suggestions for improving the equity and efficiency of the system. It argues for a better defined role of provincial councils in the delivery of services, a more rational and predictable system of intergovernmental transfers that constitute the primary source of funds for the provinces, and suggests alternatives to the present tax system – particularly with reference to indirect taxation – that would be more efficient. The study does not recommend borrowing powers for provinces at the present juncture owing to financial weaknesses.

As part of the work for this study, two training programmes for Sri Lankan officials including those from the provincial councils as also from the Finance Commission were conducted at the Institute during November-December, 2007.

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