What is Somalia’s Finance Guru up to? Something Big or Selling Snake Oil

[Deeq A.]

By Prof. Hassan Keynan

One of the most prominent and most visible members of Prime Minister Khaire’s cabinet is the Minister of Finance. The webpage of the Federal Ministry of Finance (MOF) and the Minister’s Twitter account are filled with the images and stories of a man in a hurry. High-level partnerships, conferences, workshops, expert meetings, consultations, technical missions, steering committees, specialized working groups, briefing sessions, press conferences, and interviews abound. The narrative pushed, in unison and with singular determination, by the entire FGS, celebrates remarkable milestones already reached; and confidently predicts the imminent breaking of a new promise-laden dawn. In fact, The Finance Minister’s ubiquitous presence, abundant promises, and enchanting projections seem to have acquired magical qualities. The top leadership of the Federal Government, including the President, Prime Minister, and senior ministers, routinely repeat the Finance Minister’s statements ad infinitum like mantra; and at times top them up with their own spin.  Many Somalis, out of desperation, seem to imbibe his optimism wholesale, even at times coming close to believing that the promised future is already here. The unveiling of the National Economic Council (NEC) on 11 August 2018 is the latest episode of this captivating drama.

So, what is Somalia’s finance guru up to? Are the prospects of solid and sustainable fiscal reforms and rapid economic turnaround predicted and promised by the Finance Minister and company real, credible, and realistically deliverable? Is the project informed by and reconcilable with the country- and context-specific realities on the ground? What exactly has been achieved to date vis-à-vis stated goals, expected outcomes, and target areas and beneficiaries? Is something big, unprecedented, and transformative in the works for Somalia? Or is the good Doctor a juju medicine man selling snake oil?

The good news

The Ministry of Finance’s project is not completely devoid of positive elements. For starters, the Finance Minister himself is its biggest asset and attraction. The principal task of the Finance Ministry, maintaining both micro and macro-economic stability in the country, is more like a distant dream than a realistic prospect. However, the Minister seems remarkably at ease and undeterred in his self-contained and hermetically sealed enclave in Mogadishu. At times, he appears quite candid in a cabinet steeped in regimentation, secrecy, and strict pecking orders. The Finance Minister has a modicum of support from his bosses in the Capital, and more importantly, the ringing endorsement of his international backers.

Regarding demonstrable progress and tangible results achieved to date, it is too early to make a definitive assessment. Nevertheless, there is evidence that some improvements have been recorded. There has been a slow but steady progress in the implementation of agreed fiscal and policy reforms. Domestic revenue mobilization has registered modest increase, partially contributing to the 24% increase in the 2019 budget reported by the Ministry of Finance. In addition, a positive economic outlook has been projected in 2018, including 3.1% growth and 1.8% reduction in inflation. This has, according to Dr Beileh, enabled the Federal Government to pay the salaries of public sector employees and members of armed forces and security agencies regularly and predictably. The FGS has also singled out the completion of the Staff-Monitored Program (SMP) as a great achievement, although the target date for the completion of the 3^rd 12-month SMP is April 2019. The FGS has also claimed that the $80 million pre-arrears financing grant provided by the World Bank and the 100 million Euros contributed by the European Union (EU) are not only an irrefutable evidence of its successful fiscal and economic reform, but also a clear indication that the international community has confidence in the FGS’s ability and commitment to stay on course. Furthermore, Dr Beileh and company point to the relentless campaign and critical preparatory work by the Federal Government towards efforts aimed obtaining debt relief under the Heavily Indebted Poor Country (HIPC). Finally, the FGS underscores the time and resources it has devoted to launch a new national currency.

Challenges

Sovereign void

Federal Government of Somalia (FGS) claims to have complete juridical sovereignty over a territory it cannot defend, strategic assets it cannot control, citizens it cannot serve and protect, and laws it cannot enforce. It is not even capable of securing the streets of the Capital, Mogadishu. Its economic project is neither informed by nor reconcilable with the country- and context-specific political, economic, demographic, and governance realities on the ground. As a state, Somalia has no coherent basis in reality, politically, territorially, and in terms of governance, legitimate authority, and rule of law. There is a multiplicity of mini-states and political groupings that are steeped in a protracted and seemingly endless squabbling and conflict.

The Somalia-Somaliland divide is the clearest and most persistent factor that debunks the monumental deception peddled by the Mogadishu-based FGS with the help of the international community. Somaliland has been granted a separate agreement in both the 2013 Compact Deal and its successor, the New Deal. It has its own Central Bank and currency. The Mogadishu-based FGS and its Finance Minister have no authority and institutional leverage over the territory and economy of Somaliland. In fact, Somaliland does not feature in the business of the FGS except when Somaliland authorities seek or secure promising investment deals and development opportunities.

A similar disconnect is evident in the relations between Mogadishu and the Federal Member States (FMS). In fact, the relationship between the FGS and FMS has become increasingly rambunctious, at times even toxic.  In their 4th conference held in Garowe 20– 24th October 2018, the Presidents of the Federal Member States issued a blistering communiqué, accusing the FGS of a litany of serious offenses and gross transgressions ranging from deliberate, even treasonous, acts to undermine the constitution and rollback the infant federal system of government, to efforts aimed at tampering with the legislative and judiciary branches, to massive and unbridled corruption, including use of donated funds for political and personal gains. The FMS have basically declared the Federal Government a rogue entity. The FGS ‘cannot be trusted with the security of the country’ the Communiqué stated.  The FMS halted all contacts and cooperation with the authorities and institutions of the FGS.

The picture that clearly emerges is that the economy that the Finance Minister talks about is for all intent and purpose the economy of Mogadishu. The figures the FGS peddles from its enclave in Villa Somalia relate more to a Mogadishu Income Account (MIA) than to a National Income Account (NIA). Mogadishu port and airport and the estimated 1.6 million inhabitants in the Capital form the core of the Finance Minister’s economic strategy. The rest of the country, accounting for 87% of the population and about 80% of the national economy, remains beyond the FGS’s authority and far beyond the reach and institutional control of the Ministry of Finance.

Debilitating data gaps: ‘for so it is, oh Lord my God, I measure it; but what it is that I measure I do not know.’

The Finance Minister has some of the best experts in the field at his disposal made available through a variety of technical missions and consultancies paid for by the World Bank, IMF, African Development Bank, UN and myriad bilateral donors. However, none of these could fix the perennial conundrum that has bedeviled efforts aimed at getting Somalia’s macroeconomic foundations and fiscal planning right: huge and debilitating data-gaps. This is particularly evident in the livestock sector, the biggest sector in the economy. According to the National Development Plan 2017 – 2019, the Livestock sector accounts for an estimated 67% of the population, 60% of GDP and at least 60% of foreign exchange earnings. Although the dominance of the livestock sector in the national economic is well known, establishing an accurate statistical database has eluded successive Somali governments, even at the best of times.

This has made the conceptualisation and measurement of the Somali economy an immensely difficult task. The ILO expert, V. Jamal, provided unique insights on this conundrum in the Economics for an Unconventional Economy (1987). No one could quite figure out the exact number of the country’s population.  About half a dozen conflicting estimates, ranging from four to eight million existed at that time. Accurate assessment of the economy and its performance had also been very difficult, because experts did not agree on the country’s GDP and the details of its growth or decline. In 1978, for example, there were five different GNP per capita estimates ranging from USD110 to USD342. During the same year three conflicting negative growth rates were recorded: Somali government (‑10%), World Bank (‑13%), and IMF (‑1%). The confusion was so great that Somalia was, in one dramatic statistical stroke, transformed from the eighth poorest country in the world with a per capita income as low as U$110 to a middle-income country with an average per capita of U$406. The problem with aggregate indicators is that ‘arbitrary changes {were} made to important magnitudes in the GDP without any explanation,’ resulting in the production of a series of conflicting and bizarre estimates with no practical link to the realities of the economy they were intended to measure.

The measurement of the Somali economy has become a mathematical enigma comprehensible only to those exceptionally skilled in ‘figure fetishism’ as I would like to describe it. The unique nature of Somalia’s economy calls for an unconventional means and tools for analyzing its manifestations and measuring its performance. In the absence of relevant and reliable data, a straightforward application of conventional techniques can only operate on the strength of a prayer like this: ‘for so it is, oh Lord my God, I measure it; but what it is that I measure I do not know.’ The FGS and its finance guru seem to be engaged in ‘figure fetishism’, cooking and peddling numbers completely divorced from the real economy of the country.

Deception, corruption, fraud and incompetence

The Federal Parliament’s Committee on Budget, Finance and Planning has just released a scathing report, accusing the Ministry of Finance and the FGS of a raft of serious allegations including gross negligence, deception, corruption, and fraudulent practices. In fact, from its very beginning the FGS led by President Mohamed Abdullahi Farmaajo and Prime Minister Hassan Khaire has been dogged by such allegations. However, the report by the parliamentary committee constitutes the first time a statutory body presented credible evidence concerning high levels of mismanagement and embezzlement of public resources at the federal level. The report, among other things, documents in minute details:

1. a)Millions of dollars that are missing or unaccounted for including $20 million received from Saudi Arabia,
2. b)Millions of dollars withdrawn from the Central Bank in a manner inconsistent with existing rules and procedures,
3. c)Large-scale financial corruption and mismanagement regarding the budget allocated to the Banadir Regional Administration, including $6 million withdrawn from the account of the Banadir Administration at the Central Bank,
4. d)Considerable amounts of funds collected on the orders of the Minister of Finance from money transfer agencies and private banks and deposited in a account controlled by the Ministry of Finance in clear violation of established financial rules,
5. e)Contracts awarded in violation of existing procurement rules.

The powerful Minister of Finance himself has not been immune to the perennial afflictions of human fallibility. The magnetic temptations of power, ambition, habit, partisanship, and arrogance occasionally surface and get in the way. These reveal themselves in a variety of manifestations, including a flair for exaggeration, even overkill; and a tendency to ignore, gloss over, or omit core and heavily consequential matters in his portfolio or in the broader affairs of the FGS and the nation at large.  For example, The Finance Minister has never talked about the issue of Somaliland with its own Central Bank and currency and the deepening conflict between the FGS and FMS. These issues have serious and far-reaching economic implications that cannot be simply and routinely dismissed. The Finance Minister’s habit to dwell on the Mogadishu Income Account and ignore or dismiss the rest of the country amounts to a deliberate and duplicitous attempt to mislead both Somalis and the international community. Data pertaining to 13% of the Somali population and an estimated 20% of the national economy cannot be peddled as an accurate assessment of the wealth of the entire nation.

In addition, the Finance Minister often finds himself in the awkward position of seeing his efforts and work frustrated, undermined, and even sabotaged by prominent and powerful officials in the FGS, including some of his colleagues in the Council of Ministers. Take the case of the dubious contract between the Federal Ministry of Defence and the UAE-based SKA international. This was a secret deal brokered by the former Federal Minister of Defence, Mohamed Mursal, in clear violation of the national procurement rules and procedures, according to a detailed and well-researched report by the Voice of America’s Investigative Dossier aired on Voice of American Somali Service on 24 April 2018. This shocking news broke while Minister Beileh was in Washington for a high-level meeting with key international donors and lenders led by the IMF and World Bank. What followed was even more perplexing. The Senior Minister who was behind the SKA scandal was in a matter of days elected as the Speaker of the Federal Parliament and country’s chief legislator. What is more, the Finance Minister, who is also a Member of Parliament, was actively involved in this dubious scheme. Other senior officials of the FGS have also assumed the role of brokers hell-bent on engaging in shady deals aimed at liquidating the country’s strategic assets or colluding with foreign vultures with total impunity. Some have been implicated in several dubious, even illegal, deals either as brokers, lobbyists, shareholders, or facilitators. Concerns have also been expressed regarding attempts by powerful forces in the FGS to bend, pervert, or flaunt existing laws or tamper with new legislative endeavors in the service of greed and corruption.

Conclusion: A cabal on the throne in Mogadishu

In April 2018 J. Peter Pham from the Atlantic Council wrote a piece on Somalia in which he mentioned the existence of ‘a cabal’ within President Farmaajo’s ‘fragile regime.’ Three months later, the reputable Foreign Policy Magazine published, on 7 August 2018, a blistering commentary, accusing the FGS’s international patrons of financing ‘a criminal patronage network.’ More and more evidence seem to be piling up, pointing to a secretive inner circle that captured the fragile Somali state and its weak institutions in the service of power, which is then ruthlessly deployed to draw more people into the patronage network. A cabal with extensive international connections seems to be on the throne in Mogadishu. And the Minister of Finance is its most lethal weapon.

Prof. Hassan Keynan is a former Professor at the Somali National University and a retired Senior UN Official

DISCLAIMER! The views and opinions expressed here are those of the authors and do not necessarily reflect the editorial position of Caasimada Online.