The 5th edition of the Somalia Economic Update, Impact of COVID-19: Policies to Manage the Crisis and Strengthen Economic Recovery, says three decades of armed conflict have contributed to poor economic outcomes and the marked decline in quality of life, destroying infrastructure and interrupting public service provision. As Somalia also faces locust invasions and devastating flooding, the analysis notes that the COVID-19 (coronavirus) pandemic has not only undermined or delayed the reform process to address these challenges but further added to the complexity of the country’s recovery.
While insecurity has taken a heavy toll on the country, the report acknowledges that securing Somalia has been, and will continue to be, expensive. The security sector accounts for one-third ($107 million) of the expenditure of Somalia’s federal government; eight-of-10 government employees are employed in the security sector, amounting to 48% of the federal government’s wage bill. International partners are estimated to spend around $1.5 billion each year on Somalia’s security sector, support which the report notes are unlikely to be sustained at this level. Partners have urged the federal government to build its own capacity and financing strategy.
With the goal of making the security sector able, accountable, affordable, and acceptable to Somali society, the government has embarked on an ambitious security sector reform process, which includes improved governance and public finance management. The report examines the government’s ongoing security sector reforms and discusses economic policy options for sustainably financing a secure Somalia.
“The World Bank is supporting the government’s public finance reform in the security sector to make it fiscally sustainable and able to efficiently deliver security services within the country’s Public Financial Management framework,” said Matthias Mayr, Senior Operations Officer and co-author of the report. “Ongoing reforms have allowed savings to be reinvested in improving the delivery of security services for the people of Somalia.”
Security sector reform is already yielding results. First, by instituting public financial management (PFM) reforms, the report acknowledges there are better accountability and effectiveness, which has led to increased public finance reform appetite and more responsible security spending.
Second, to complement improved controls, the government has installed central purchasing contracts for all major supplies to the Somalia National Army (SNA), which has resulted in savings for the federal government’s budget. Using the Procurement Act to set clear processes and practices for government procurement, this reform has reduced discretionary and unsupervised spending, yielding savings and reducing opportunities for misappropriation.
As the government moves forward with implementing its public finance roadmap to mobilize and harmonize efforts around the restoration of security to accelerate social and economic development, the report recommends several policy options, including:
Better understand the cost drivers in the security sector and act on them in the long run: Outputs from the Somalia Financial Management Information System (SFMIS), Humana Resource Management Information System (HRMIS), and registration process should be used to understand what drives cost, where there is scope for cost-saving and reallocation of resources.
Improve financial management and internal controls in the security sector: Help address public finance risks and maximize value for money within the security sector by developing robust human resource management functions, creating a payroll system that delivers pay consistently, and increasing the accountability of the security sector. Concrete actions include improving the capacity of the security sector to manage larger and recurrent contracts and logistics and to verify the delivery of goods and services to the armed forces. Work with the Office of the Accountant General and the Office of the Auditor-General to strengthen internal audit functions and establish accountable and auditable expenditures in the security sector, expanding beyond the main expenditure categories of salaries and rations to include logistics procedures, asset management, and operating costs.
Strengthen transparency of security sector public finance systems: Support strategic financial decision making and the delivery of the National Security Architecture, the revised constitution, and the Ninth Development Plan. This can be achieved by building the institutional capacity of the security institutions, strengthening public financial management capacity, and increasing investment in developing the capabilities and capacities of key civilian governance institutions and people across government, based on Financial Governance Committee recommendations.
According to the report, these measures will help the federal government to build its own capacity and financing strategy as Somalia works towards self-reliance for the critical security sector and focusing its efforts on investment in social and economic development.