Somaliland Budget 2020: A cautionary note

By: Yassin Abdillahi Ahmed

As usual, before I look at the budget in detail, I must say a word or two about the definition of budget. Budget is a financial plan that articulates the objectives and goals of a government for a certain period usually a year. In other words, it is the annual economic strategy but there are occasions when planning, instead of helpful, becomes harmful. Budgeting is a difficult and daunting process of estimating both revenue and expenses during a specific period. A national budget is the financial plan of a country. The government gets money from fees, taxes and fines, and spends on its national interests like national defense, Security, infrastructure, grants for research, Education, Social agendas such as Social security and Medicare.

Somaliland Budget 2020 is 331.5 million dollars. The Central Government Budget is 246.5 million while the parastatal  agencies (like Hargeisa water agency, National printing agency, Central Bank and Berbera Fuel depot) has 29.16 million; Local governments had a budget of 39.36 million while World Bank projects, Somaliland Development Fund and JPLG projects are 5.5 Million, 9 million and 2 million respectively.

On 19 November 2019, Somaliland Minister of Finance presented 2020 National budget to the House of Representatives. Therefore, in this article by using budget data from the 2020 Financial Year, I will make a number of analyses regarding the budget source of revenues, allocations, mismatches, and budget priorities. This will allow us to understand how the 2020 Government Budget allocations differ from the National Development Plan II and realities on the ground.

The best practice for budget measuring contains no more than the following 8 steps: Pre-budget Statement, Executive Budget Proposal, Enacted Budget, Citizens Budget, in year report, mid-year review, year-end reports as well as Auditors Report. However, to the dismay of many citizens hardly three of the above-mentioned items exist; even though those are shrouded with secrecy while public participation is close to nil and with little details and unfortunately at least four of these eight steps does not exist, at all.

The 2020 budget and its format are markedly different from last year’s not as format but substance as well. Under the leadership of the acclaimed economist, finance minister has taken baby steps of reform. The ministry produced Macroeconomic and fiscal framework, Medium-term Budget framework and budget outlook paper. It has increased the Tax identification numbers from a few hundred to over 6000. The number of regulatory frameworks has been introduced, to some extent the Information management system has been implemented, staff training, and development has been prioritized which further facilitated streamlining data and production of quarterly economic performance bulleting was the icing on the cake.

This budget is 17.6% higher than the current 2019 budget, with the forecasted 8.3% growth for a coming couple of years; 2023 will be historic year for Somaliland, domestic revenue will surpass  400 million dollars coupled with the completion of  Berbera port expansion and Ethiopia’s anticipated 30% of its import handling to be channeled through Berbera port will have a multiplying effect on the revenue.  Donor funded projects are insignificant 6.7% unlike Somalia with the direct budgetary support and donor project funded are approximately 50% its budget.

This budget shows clear gaps of not only tax collection at large but also the large discrepancy of income lines, the dividend of Berbera Port and 10% of income tax is not included for the third consecutive year in a row. The overall income for the central government contains $246.5 Million: Customs account the largest amount 77.6% while Inland Revenue contributes only 16.6% and the rest contain 7%.  This year customs revenue is an increase while inland revenue and other sources are in a decrease in percentagewise and it is the manifestation of current strategies for inland revenue collection increase is inadequate. Telecommunication and Financial sectors seem to the least under-taxed and have limited contribution of overall income despite handling at least Billion dollar.

There has been a prodigious improvement for revenue collection of both inland revenue and customs department.  To add to that, 2019 might end up the first year forecast that revenue has been achieved for the last 5 years.

Of the 31.7 million dollars extra revenue, all most, all ministries and agencies benefited; operational cost has been increased 5% flat for all; but 19% went to security, 27% went to economic sector, 23.45 went to Social affairs, 18.82 went to administration, 2.97% to production, 2.7% infrastructure, .7% environment and Others 4.2

Despite having a 340-million-dollar budget, only 23 million has been allocated the paramount portfolio of   Education Ministry which is only no more than 7% of the overall budget. Currently, we are lowest school enrolment in the region approximately 30% of aged children go to school[1]while Kenya whose school enrolment reached 76.2% in 2017 coupled with 84% completion rate of primary schools with further 88% transition rate from Primary to secondary heavily invests Education in 4.7 Billion dollars but our significant amount is hindering not only the current development endeavors but as well future generations.

The health sector is not any better shape under the current budget, 10.24 million dollars has been allocated a country with the highest child and infant mortality and coupled with the high mortality death approximately 850[2] per 100,000 it too insignificant such a small amount. Education and Health in total have been allocated 34 Million dollars which is a fraction of 8.29 dollars per person.

Infrastructure has not been adequately rewarded but maybe the intention can be: as there are large donor-funded infrastructural developmental project including the Berbera Corridor and planned Borama-Djibouti Road and Port Expansion under the DP world and with forthcoming proper maintenance of both Bridges and road between Berbera-Buroa under Somaliland Development Fund but make no mistake,  the infrastructure can’t take a back seat under our current realities.

One of the notable differences for 2019-2020 budget is: security sector budget has decreased 2% while the Economic, Social and Energy sectors increased 1.5%, 1.2%

The top ten prioritized institutions have a combined budget of 85 percent while the least prioritized institutions had a combined budget of 1.6%. comparing to the 2019 budget the ten topmost prioritized institutions increased their share from 69% to a new Hight of 85% while the 10 least prioritized institutions combined share diminished from 1.84% to 1.6% and .1% respectively.

The presidency including Office of the President, Vice president and it’s Security Guards has more budget than 11 Supreme ministries including Water, Livestock and Fishery, Agriculture, environment and wildlife, Energy and minerals, Employment and Social , Planning and National Development, Public works and Housing, Investment and Parliamentary coordination & constitution; astonishing to see while more than one-third of GDP is derived from Livestock, fishery and agriculture but still our core Ministries are underfunded a country with upside-down priorities!

Anything admired-yes, the increase of budgetary allocation for both Environment and foreign Ministries is a welcome to note; continuation Buroa-Erigavo Road, enclosure of two rangeland of Sanaag region in order to increase fodder production and increase of land regeneration, the inclusion of pet project across the country is at least helping citizen in various ways. Construction for more MCHs and Health centers, construction of Harvey Dams and budgetary increase for Hospitals are important incremental steps. But make no mistake, as internationally unrecognized de facto state, we need to invest more in Education and infrastructure this will be a leap into the future and there is genuine demand to fund large labor-intensive projects with far-reaching implications and will have multiplying effect for the entire economy.

Finally, Somaliland Budget is one of the most crucial or important documents that the Government produces annually. It takes the preparation of months yet hardly it attracts any attention either from Academia, Civil Society, Opposition Parties and Media and rubber-stamp House of Representatives hardly debated. Hard it been debated intensely, winners could have been not only Citizens but Government, Opposition, Academics, and the entire Country could have been the winner but was another avenue we failed to endeavor.

By: Yassin Abdillahi Ahmed

Hargeisa, Somaliland

Yassin_abdillahi@hotmail.com

[1]  According to the ministry of Education interview

[2] Somaliland Women of Reproductive Age Mortality Survey 2014 jointly prepared by WHO and University of Aberdeen.

The views expressed in this article are the author’s own and do not necessarily reflect Horndiplomat editorial policy.

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