Somalia: Delayed elections have kept the economy hanging by a thread, says finance minister Beileh

By Anne-Marie Bissada
Posted on Thursday, 31 March 2022 09:18

While Somalia is still fighting a low-grade war against the Islamist insurgents of Al-Shabaab, it has managed to rebuild the country back from when it was on the brink of “melting away as a country”, says finance minister Abdirahman Beileh. The country has the capacity to become more self-sufficient, but its progress is impeded by unstable politics and security threats. The delayed presidential election is a major obstacle for the country, Beileh tells The Africa Report.

Beileh is a renowned poet and song writer. Somalia’s finance minister’s latest song speaks to the frustration caused by Somalia’s political leadership. His lyrics ask reckless politicians to go beyond their personal interests and look out for the Somali people.

The country’s indirect presidential election was due to take place last year after President Mohamed ‘Farmaajo’ Abdullahi Mohamed’s mandate expired on 8 February. But disagreements on the implementation of a new electoral model have pushed back the poll on numerous occasions. It was only at the start of this year that parliamentary elections were finally started.

“Somalia has its own issues and its own problems. And, of course, it’s a fragile country, and anything can happen. But I think we all now agree that we are coming closer and closer to the days of election,” he says. The fact that the parliamentary elections are “96% completed” means the first phase to the presidential polls is nearly done.

Delayed elections, again and again…

The elections have kept Somalia’s economy hanging on by a thread. “We must have a president by the first week or so in May for us to be able to get access to the financial support of the international community. Otherwise, we’ll have serious cuts in financing and therefore, a serious impact on our ability to continue the IMF programme,” he says.

The cost of the election is not a major issue right now. The agreement from the start, he says, was that 10% of the cost is to be paid by the federal government, a large percentage by the candidates and the rest by international partners. “Financing is not a major breaking point,” Beileh explains. The elections, however, need to be held before a critical deadline for debt relief.

Politicking and the election delays nearly brought the country to the brink of civil unrest, scaring off many donors. Last year, there was a reported 30% cut in donor funding.

Some reports said donors cut funding due to a lack of transparency. Beileh is adamant that that is not the case. “All the institutions that we are working with know that we have a come a very, very long way. We have automated everything, and that’s the beginning of fighting against corruption. So, on that side, we are doing very well.”

Beileh insists: “The election was the reason” for the cuts.

Once the polls take place, then the international institutions, mainly the European Union (EU) and the World Bank “will start releasing funds”, he argues.

Funding from the IMF, WB and Paris Club

Beileh is speaking to The Africa Report via a Zoom call from the United States, where he has just concluded a visit with the IMF managing director Kristalina Georgieva. He met with the IMF and the World Bank to discuss Somalia’s challenges. “We are working very closely with the IMF,” Beileh says, “and that is a very rigorous programme.”

In 2020, the IMF and the World Bank approved Somalia for assistance through the Enhance Heavily Indebted Poor Countries initiative. Under the terms of the programme, the country’s debt could fall from $5.2bn to $557m. But the electoral delays have put the country at risk. A new administration may not be voted in time to endorse the planned reforms in time for a review on 17 May. If the review is not completed by then, the programme automatically terminates.

Before arriving in the US, Beileh had a virtual meeting with Paris Club creditors, non-Paris club creditors and international financial institutions. “They have supported us tremendously. […] We have to thank them for what they have done for Somalia,” he says.

Self-sufficiency reality

Russia’s war against Ukraine highlights Somalia’s reliance on imports. Despite Somalia being a country that imports so much, “We don’t import anything from them,” referring to Ukraine and Russia. That said, the war is hitting Somalia indirectly. “And so we feel already the fuel prices picking up, prices of items, staple foods.” That alone is enough to worry Somalia’s finance minister. “We are [a] very fragile country. And the ways of mitigating [the indirect effects] is not very easy. We just hope that these wars will end soon.”

Somalia could cut its imports in the longer term. “We are blessed with all the potentials you can think about. We have human resources. We have natural resources. We have plenty of resources that support our livelihood,” says finance minister Beileh.

One area with potential is farming. “We have to produce what we eat, and there is no reason why we cannot do that.” Beileh points to government’s investment in farming systems, along with support for “social sectors, health and education”.

But undercutting most potential for progress is the problem of security.  Much of the insecurity is in the “main food-producing basket areas in the country”. The government has tried to fight insecurity, but it remains a palpable and daily threat. An attack on 23 March by Al-Shabaab north of Mogadishu killed 48 and wounded more than 100.

Another problem tied to insecurity is climate change, namely droughts and locusts. The country has experienced its worst drought in 30 years, and the Horn has been hit by locusts that have destroyed crops. “Somalia is used to drought,” says Beileh, but “I think Somalia is the only country remaining on the face of the earth [where] drought happens and people die. […] That is the ultimate fragility.”

The former head of the African Development Bank’s department of agriculture and agro-industry notes that the government is trying to manage its resources to mitigate such extreme effects. “Our Indian Ocean receives plenty of water every 24 hours […] and upstream people are starving. […] It’s an anomaly that has to be put to stop.”

The finance minister notes some progress: “We have to develop the resources and that will require three or four more years of receiving big investments. And some of them may be public-private partnership on the irrigations systems, the establishment of a number of factories to process the food and the livestock industry. So, it will take a while, but we have started.”

In the disputed breakaway region of Somaliland, Dubai’s DP Word operates a port, in which Ethiopia also has a stake. Is the arrangement taking away much-needed revenue from Somalia?

Beileh asserts firstly that “there is no Somaliland, no Puntland or nothing.” The federal system means each region has its own avenue of funding, “and so Somaliland has been benefitting and will continue to benefit from this.”

Revenue

The federal government wants to improve its revenue collection systems. The current model includes an array of systems, often informal, such as the one in the city of Dolow, where people organised themselves to help rebuild an airport terminal. “This country had no federal government for a long time. […] So there were pockets of administration. We have a national system because we were a government before we collapsed. We had a tax system,” Beileh explains.

It has only been in the past five years, he adds, that the government has been trying to improve the tax system. But that also takes convincing people who have not paid taxes in years and “who don’t understand why we are taxing anybody […] particularly when they don’t see us building roads”.

We don’t want to go back to where we were some many years ago. This country has seen chaos…

The money from taxes goes into paying “civil servants, and we are paying the drivers and the electricity of offices. […] But we don’t have enough to do the other things.”

Having a strong tax system will also help the country to become more financially independent. Beileh stresses how Mogadishu cannot continue to depend on external powers to “produce our food, produce our shelter and to take care of our security”.

Security post-AMISOM

The peacekeeping mandate of the African Union Mission to Somalia (AMISOM) will end on 31 March, and the Transitional African Union Mission in Somalia will take over until the end of 2024. AMISOM’s forces deployed to Somalia in 2007, and the government is still unable to provide security across the country.

“We don’t want to go back to where we were some many years ago. This country has seen chaos. […] So what the government is proposing is based on critical analysis and comparisons and cost benefit analysis and critical evaluation of our armed forces.” That being said, funding assistance from international donors for the Somali security forces would be necessary, says the finance minister, at least “for a year or two or so”.

But he quickly adds that “there has to be a cut-off point. There has to be a point that we can foresee [the] economy growing, revenue growing, collection growing and therefore phasing out somebody else [and] chipping in.”

Help from the diaspora

The Somali economy gets help from remittances from the diaspora. In 2020, remittances totalled 24.9% of Somalia’s GDP.

“There is no cut of a link. […] The diaspora is always there, and they are remitting it still. And more importantly, they are taking part in reconstructing the country. They are coming back with their investment, and they are rebuilding.”

Hard work and patience have been critical in Beileh’s and many Somalis’ lives. “When I went to school, we were about 30 or 40 people, 40 students in the country, the US. Everybody was going to [a] school of business. And sometimes you wonder, you don’t see them going to medical schools, architecture, sociology, anthropology, forget it! They are focusing on how to make money.”

That spirt of entrepreneurship and resilience, Beileh concludes, has kept the Somali people going despite all hardships.

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