Regional Constitutions have been revised to provide self administration powers and responsibilities to woreda administrations, facilitate local development, and render decisions on internal affairs. The budgeting and spending guidelines used in the decentralisation effort are in conformity with the criteria for medium term public expenditure allocation stated in the PASDEP, MEFF, and PIP. Implementation Challenges 377 The CSAR states that implementation challenges mainly arise from the following: • Institutional and technical capacity inadequacies in most government departments, especially in rural decentralised structures, making them less capable of providing needed support for the success of fiscal decentralisation; • Low capacity of Regional States and woredas to generate own resources and to implement decentralised programmes. Regional states then rely heavy on the Federal Government to fund their budgets; • The constitutional assignment of revenue-generating powers is currently skewed in favour of central government since the bulk of revenues collectable come from external sources (trade taxes); • The current inter-governmental grant regime does not create incentive for additional revenue generation by the regional states. The “own-revenue” component of the grants regime effectively imposes an 85 percent tax on any extra revenue regional states generate via taxes or improved administration of existing taxes; and, • Central government also reduces block grants to regional states by exactly the amount of foreign aid a region receives. States are therefore not eager to pursue additional donor projects. II. Findings of the CRM Policy Framework 378 Since adopting the SDPRP, PASDEP and the MDGs, these have guided overall national macro-economic policy and planning frameworks for stimulating growth and eradicating poverty. In tandem with these frameworks, the MEFF is used by the Government as a tool for establishing the resource envelope and broad sectoral allocations, in line with its overall policy objectives of ending poverty and achieving MDG targets, while maintaining fiscal discipline. In addition, the MEFF is an instrument by which three-year resources are identified on the basis of the macroeconomic framework. An extended version of the MEFF (stretching - 157 -