General Knowledge
Gwilliam, Kenneth and Ajay Kumar
The World Bank
Published in
Submitted by
Olim Latipov
Related theme(s)
Finances & Economics
All Regions

Road Funds Revisited

Systematic underfunding and inefficient execution has been a perennial problem in the road sector. “Second generation road funds ,” involving direct payment of a levy on fuel tax and other revenues directly to a fund managed by a board representing users interests, have been established in a number of countries to address this. Such developments have long been viewed by macroeconomists as crude earmarking, and opposed because of their damaging effects on fiscal flexibility. In an article in this journal Gwilliam and Shalizi argued that such road funds should be subject to “sunset provisions” as an interim step towards either full commercialization of road maintenance or a return to good governance within the public sector, and that in deciding whether to create (or retain) a fund decision makers should estimate its effects on resource allocation, operational efficiency and rent seeking.

This article reviews the empirical evidence with road funds in Africa. It observes that the new road funds have not, in practice, undermined fiscal flexibility, but have been the instrument through whic h the process of administration of road funding and its outputs have been somewhat improved in terms of execution capability and ultimately road condition. It is therefore concluded that, while the criteria for assessing road funds remain relevant, quasiautonomous
Roads boards administering road funds should not be automatically viewed as transient, and that in the establishment of new funds the role of government in respect of approving levels of revenue for expenditure on road maintenance programs should be explicitly recognized.

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