A federal state structure and the principle of local government autonomy are anchored in the Ethiopian constitution of 1995.

The pace of urbanisation, however, is overstretching the capacity of municipal administrations to provide adequate access to basic services for their citizens. Due to the shortage of qualified staff and of procedures and instruments for urban financial management and urban planning, it is not possible to realise the degree of municipal autonomy provided for under the law. In practice, civil society actors hardly participate in local planning and decision-making processes. The financial resources available to cities and towns are far below their requirements.

The Urban Development and Decentralisation programme builds the capacity of urban centres and cities so that they can independently manage the financial resources needed to deliver public services efficiently and effectively to the local population. A further aim of the programme is to involve the inhabitants in decision-making processes and their implementation.

The programme has three components:

• strengthen municipal infrastructure and services
• improve urban management
• introduce knowledge management methods and share lessons learned.

Since 2010, along with eight cities and towns in the central regions, the capitals of Ethiopia’s peripheral regions have been integrated into the implementation of the urban development policy. The main task in these cities is firstly to establish municipal administrations. The programme works closely with KfW Entwicklungsbank and the national urban development programme, which is partly financed by the World Bank.

Extensive local governance reforms have led to greater transparency and boosted efficiency. Several cities consult their citizens on financial and urban development issues and have reported considerable increases in income.

Demand-oriented urban infrastructure and other public services are now provided on a wider scale, and levels of satisfaction among the population in these areas have seen a marked increase since 2007.

The Ethiopian Cities Association, a self-learning system for knowledge management and horizontal experience-sharing, guarantees the sustainability of the reforms now underway.