set out conditions

Somalia fights corruption for debt relief and economic transformation

By Abdulkadir Fooday

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Posted on June 6, 2023 07:30

 © A dealer counts of Somalian currency (shillings) and U.S. dollars at an open forex bureau along Hamarweyne district of in Somalia’s capital Mogadishu, January 27, 2016. SOMALIA-ECONOMY/ REUTERS/Feisal Omar
A dealer counts of Somalian currency (shillings) and U.S. dollars at an open forex bureau along Hamarweyne district of in Somalia’s capital Mogadishu, January 27, 2016. SOMALIA-ECONOMY/ REUTERS/Feisal Omar

The Corruption Perceptions Index’s 2022 report, which ranked 180 countries, has placed Somalia at the bottom of its list. The rampant corruption in the Horn of Africa country continues to impede its economic growth and development, but it could become eligible for debt relief by the end of the year, with over $5bn owed to external creditors.

To be considered for relief, the country must make a visible effort to tackle corruption and improve its financial institutions in line with economic reforms. The impetus for such a deal has spawned the Somali government to announce an all-out war on corruption.

Clamp-down on corruption

President Hassan Sheikh Mohamud has signed a series of anti-corruption directives, saying his administration is committed to fighting the problem. He added that individuals have already been arrested for corruption-related offenses and will be brought to justice soon. Prime Minister Hamza Abdi Barre added that the trials for those already in custody would be publicly televised.

The government’s directive to tackle the age-old problem includes combatting meritocracy, enhancing public financial management systems, strengthening accountability, and improving the efficiency and effectiveness of government institutions.

To further this, Barre has appointed an eight-member committee to oversee the restoration and evaluation of the nation’s property. The committee includes the Minister of Finance, Minister of Foreign Affairs, the mayor of Mogadishu, and the governor of the Banadir region. Following the collapse of the central government in 1991, many of the government ministries’ headquarters, along with universities, factories and hospitals were seized by the public. This restoration effort aims to return them to state control.

Relief on the way

In March, Somali government officials led by the Finance minister met with representatives from the IMF and the World Bank in Nairobi to emphasise the importance of the debt relief programme. The attending parties agreed to implement conditions, revitalise domestic revenue, and boost the country’s Public Financial Management (PFM) process.

Dhaqane Halane, an economist and visiting researcher at Somalia’s SIMAD University Institute of Climate and Environment (ICE), says initiatives to stop the usage of state funds illegally will contribute to bolstering the country’s economic strength.

“I believe that if the government genuinely works to eliminate the widespread corruption in the system, it will impact the country’s overall economy. Lowering the level of corruption will increase revenue mobilisation, attract foreign direct investment, increase job creation, enhance the country’s production, and ultimately lead to the rise of the GDP,” Dhaqane tells The Africa Report.

He adds that strengthening the country’s financial institutions ultimately impacts economic growth in three ways.

“Firstly, it enhances investments and encourages savings. Secondly, it helps the government [focus on] revenue mobilisation. Thirdly, it will promote financial inclusion or access to finance.”

Conditions for aid

The government, however, has to meet certain conditions to obtain debt relief from foreign lenders.

To begin with, it must implement the tax integration system between the government and the Federal Member States (FMS).

Puntland state, which is at odds with the central government, has refused to participate in several meetings in Mogadishu, angering the Somali Prime Minister, who in return accused Puntland of being a blockage in obtaining debt relief.

Other conditions include improving the current state of the justice system.

“The main challenges the government can face during its fight against corruption are [how] the laws [are] not applied, [and the overall weak] justice system, which then sees power centralised in the hands of certain clans thereby feeding into a loop of distrust of the system,” says Yahye Amir, an economist and World Bank consultant.

He adds: “Most of the government officials are not qualified for their positions in terms of education and experience.”

Amir believes that if all anti-corruption policies were applied as prescribed, Somalia would be capable of securing debt relief and creating a positive environment between Somalis and the IMF and World Bank.

Analysts argue that if the government fails to combat corruption, it will lack a system of good governance and transparency, making it impossible to trust the international partners’ donations, even though the country still needs assistance.

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