Revenue Sharing: Strengthening Municipalities for Sustainable Development in Liberia | Commentaries

The success of Liberia’s decentralization agenda depends largely on one critical factor: the financial empowerment of local governments. The Local Government Act of 2018 laid the legal foundation for this transformation by establishing a system in which municipalities are not only administratively responsible but also financially capable of delivering services to citizens.

A key provision of the Act is Section 4.1 (Principles for Fiscal Resources in Support of Local Government), which provides that:

“Local governments shall be provided with adequate, identifiable, and reliable sources of revenue to enable them to perform their functions effectively and sustainably.”

(Local Government Act of 2018, Section 4.1)

This provision is the backbone of Liberia’s fiscal decentralization framework and directly supports the Revenue Sharing Law, which is designed to ensure that national revenues are distributed to local governments in a fair and structured manner.

The Importance of Revenue Sharing in the LGA 2018

Revenue sharing is essential because it bridges the gap between municipal responsibilities and available financial resources. While municipalities are mandated to provide services such as sanitation, drainage systems, market maintenance, street lighting, and urban planning, many lack sufficient local revenue bases to meet these obligations.

The Revenue Sharing Law therefore, plays a stabilizing role by ensuring that a portion of nationally collected revenues is redistributed to local governments. This is not simply a financial mechanism—it is a governance reform designed to strengthen equity, improve service delivery, and deepen decentralization.

As emphasized in the Local Government Act of 2018, decentralization is not only about transferring authority, but also about ensuring that resources follow responsibilities.

Benefits of Revenue Sharing to Municipalities

The implementation of a structured revenue-sharing system offers several key benefits:

First, it strengthens decentralization. Municipal governments can only function effectively when they have both authority and financial capacity. Revenue sharing ensures that local governments are not dependent solely on central discretion.

Second, it promotes equity across municipalities. Not all cities in Liberia have the same revenue base. Revenue sharing ensures that smaller or less economically active municipalities still receive funds to deliver basic services.

Third, it improves public service delivery. With predictable funding, municipalities can invest in roads, waste management systems, drainage rehabilitation, and public facilities that directly improve citizens’ quality of life.

Fourth, it enhances accountability. When citizens see clear links between public funds and visible development, trust in local governance increases, strengthening democratic participation.

Lessons from China’s Fiscal Decentralization Experience

International experience demonstrates that revenue-sharing systems can significantly enhance local development when implemented effectively. China provides a relevant comparative example.

Since fiscal reforms beginning in the 1990s, China has operated a system of intergovernmental fiscal transfers, where the central government collects major revenues and redistributes significant resources to local governments to support development and service delivery.

According to the Organization for Economic Co-operation and Development (OECD), China’s fiscal system is structured in such a way that local governments depend heavily on fiscal transfers to finance infrastructure and public services, despite having responsibility for large portions of public expenditure.

These transfers have enabled Chinese municipalities to finance large-scale urban development projects, including roads, drainage systems, public transportation networks, sanitation infrastructure, and industrial expansion. 

Research on China’s fiscal structure shows that intergovernmental transfers significantly increase local infrastructure investment and service delivery capacity.

However, China’s experience also highlights an important lesson: there is often a mismatch between expenditure responsibilities and revenue authority at the local level, making fiscal transfers and revenue sharing essential for sustaining development.

During my academic exposure in China, I observed how municipalities effectively combined central fiscal transfers with local revenue generation to manage urban development. 

Public services such as transport systems, market regulation, parking administration, and sanitation services were supported through structured fiscal arrangements that ensured predictable and stable funding at the local level.

The result has been rapid urban transformation, where cities expanded infrastructure, attracted investment, and significantly improved living standards through well-financed municipal systems.

The Way Forward for Liberia

For Liberia, the lesson is clear: the Revenue Sharing provisions of the Local Government Act of 2018 must be fully implemented to ensure that municipalities are financially empowered. Without consistent and transparent revenue sharing, decentralization will remain incomplete.

At the same time, revenue sharing must complement—not replace—own source revenue generation. Municipalities must continue strengthening local tax systems, including property taxes, business licenses, market dues, parking fees, and other legally authorized revenue instruments.

When effectively combined, revenue sharing and own source revenue generation will create financially resilient municipalities capable of delivering services, supporting economic growth, and improving citizens’ quality of life.

The Revenue Sharing Law is not merely a fiscal policy—it is a development tool embedded within Liberia’s decentralization framework. It ensures that national resources are distributed in a way that strengthens local governance and promotes balanced national development.

Liberia’s future development will depend not only on national-level policies but also on the strength of its municipalities. When local governments are financially empowered, they become engines of development, innovation, and service delivery.

As the Local Government Act of 2018 clearly implies, sustainable decentralization is only possible when financial resources are shared fairly and effectively between the central government and local authorities.

“Strong municipalities are the foundation of strong national development.”