Somalia’s debt relief fueled corruption and political conflicts

[Deeq A.]

By: Dr. Mohamud Uluso

Readers may question how come debt relief which is beneficial for Somalia fueled intense corruption, political conflicts, and Insecurity? The answer is focus on debt relief has provided the leaders of the federal government of Somalia (FGS) the opportunity and cover to neglect their core obligations under the constitution and to commit all kinds of wrongdoing without facing accountability and condemnation for two main reasons.

First, major International Financial Institutions (IFI) – International Monetary Fund (IMF), World Bank (WB), African Development Bank (AfDB) – dominate the debt relief process and are in bed solely with the federal government notwithstanding the decentralized democratic system of governance evolving in Somalia. This has put the power and prestige of the IFI exclusively behind the federal government for partnership and protection. Second, the debt relief involves the writing down of an external debt of 5.3 billion dollars (2018), a task that has international implications. Thus, both reasons made debt relief the highest priority for Somalia.

The IFI had to encourage and compliment the federal government for the implementation of successive IMF Staff Monitoring Programs (SMP) so it can be eligible for Heavily Indebted Poor Countries (HIPC) debt relief.  Unfortunately, the federal government took advantage of IFI generous compliments for debt relief and chose to pursue in parallel tyrannical policies jeopardizing national reconciliation, peace, security, and nation building principles. Key international partners stood by the federal government despite witnessing flagrant abuses of power and corruption going on in the last 3 years. Of late, Majority of Somalis were terribly shocked by the hasty recognition of US Ambassador to Somalia the outcome of fraudulent election in Galmudug State rigged in broad daylight by the federal government.

By mid-2017, immediately after his election in February 2017, President Formajo abandoned his electoral promises for rule of law and good governance and pursued with all means necessary, including use of AMISOM forces, the removal of the presidents of the federal member states to be replaced with handpicked loyalists, confrontation with Somaliland, cronyism for public service, discrimination and politicization of security forces, Oil and Gas exploitation and increase of taxation for debt relief eligibility.

After the federal government has been claiming successful implementation of IMF-SMP centered on improvement of Public Financial Management (PFM), Transparency International (TI) Report 2019 on Corruption Perception Index (CPI) ranked Somalia at the bottom of 180 countries and territories for being the most corrupt country in the world. Somalia went down from 10 points in 2018 to 9 points in 2019. The report affirms that money is used to win elections, consolidate power and further personal interests. Corruption worsened further after President Farmajo systematically destroyed the democratic foundations – rule of law, oversight functions of the federal parliament and judicial independence. The flurry of Debt relief activities suppressed the concern over deepening corruption and political crisis.

Similarly, according to Ibrahim Index African Governance (IIAG) report 2018, Somalia ranked 54 out of 54 countries with score of 13.6 out of 100 points. The score is based on safety and rule of law, participation of citizens in the public decision making process, respect of human rights, and human development.

Somalia is far from meeting the debt relief conditions. The Somali people face the challenges of national reconciliation and consensus on national constitution that defines finally the form of the Somali state under formation horizontally and vertically. IMF-SMP encourages national integration and solidarity, free market economy, and good governance, while the federal government pursues national discord, violations of freedom of media and expression, assembly and protest, persecution of opposition, state control of the economy and judicial system, and fraudulent elections  to hold on power illegally.

The security control of the federal government over the capital Mogadishu is inadequate. In fact, IMF team and Somali Government delegation meet regularly outside Somalia like Addis Ababa, Ethiopia for political and security concerns. High level officials from the Somali international partners are living in Nairobi, Kenya. Al Shabab strengthened, not degraded or defeated after 3 years.

The central bank has long way to go to fulfill adequately its basic functions countrywide. It hasn’t published independent annual accounts. The Somali economy lacks integration, it is dollarized and there is no national currency for good reasons. Economic institutions are ineffective and corrupt.

Despite IMF pressure to conduct IMF open budget survey for Transparency, the Ministry of finance hasn’t published credible closing fiscal budget accounts for 3 years.  It is almost impossible to scrutinize independently budget expenditures because there is no oversight institutions and credible transparency. The Auditor General issued damning report on the mismanagement of 2018 fiscal budget but the report has been buried definitively.

For 2020 fiscal budget, the Ministry of Finance manages $ 109.65 million dollars which is 23% of total revenue – domestic revenue and foreign grants. In addition, the Ministry holds control of the disbursements of allocations under the ministries of foreign affairs, internal affairs, security and defense amounting to $ 181.55 million which is 40% of total budget. This means that the Ministry of Finance manages directly the disbursement of more than 63% of 2020 fiscal budget. This explains the endemic corruption presided by the Ministry of Finance.

In the case of Somalia, the consensus is that debt relief contribution to economic revival and growth will be minimal or nothing. Indeed, Somalia’s debt relief will not free resources for poverty reduction because Somalia has not been paying its debt since 1987. Somalia will have to repay at least 8% of its accumulated debt unless total cancellation is guaranteed. The expected benefits from debt relief is access to international lending institutions for borrowing and IFI catalyst support for international donors.

Dr. Mohamud Uluso can be reached at mohamuduluso@gmail.com

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