For the public sector to deliver public services and achieve its policy objectives, it is critical that public finances are managed well. Critics of decentralization point out that local governments are often administratively weak, and that poor local financial management can negate the potential benefits from decentralization. While the available research suggests that local financial management outcomes are influenced by more than a local governments financial management practices, little is known in the literature about the determinants of effective local financial management in developing and transition economies. The empirical analysis in this paper uses data for local government authorities in Tanzania in order to explore the relationship between local financial management performance on one hand, and local management practices, local governance, and other local characteristics on the other hand.
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