By Abdulkadir Suleiman
By January 27, 2015, a very relative few people knew Mohamed A. Ibrahim (Farkeeti)—the outgoing Finance Minister. He was not well known in the circle of Somali politics until Prime Minister Omar Abdirashid assigned him to lead the country’s economic institutions and to envision reform policies that drive financial institutions into more transparency, accountability and further improve the government’s capacity to increase domestic revenue—one of the most challenging areas to reform.
Today, he is regarded as a reformist, an orator, humble and a friendly economist who embarked policies that helped drive the country’s economic institutions into more progressive ways of development, and drastically changed the traditional way of business process into an automated model. His policies further helped strengthen the country’s effort to restore ties with International Financial Institutions (IFIs). Notwithstanding, Somalia governance institutions still remain substantially weak despite quite recent improvement in the areas of macroeconomic management.
Nevertheless, Mr. Ibrahim developed and implemented number of strategies to tackle and reform economic institutions throughout his tenure in the finance portfolio. The least of them is discussed briefly in the following paragraphs just for the benefit of reformists.
Automation Revenue Capturing Strategies
Improving domestic revenue is not only daunting in Somalia but also a mystery for Somali government due to factors inherited from Somalia’s civil war that lasted for almost a quarter of century. Sources of domestic revenue were heavily privatized and very strong interest groups flourished in the course of the anarchy that turned them to be in a position to manipulate government business. Corporate and other forms of income tax were virtually non-existent. Despite these challenges, a quite number of reform initiatives in the domestic revenue were undertaken under the auspices of H.E Mohamed A. Ibrahim that consequently resulted a significant improvement in the performance of domestic revenue; 36% of tax revenue was registered in 2015 expanding from USD 84.3 Million to USD 114.3 million in 2014 and 2015 respectively. It is further projected that in 2016 the momentum of improvement would continue with the expectation of realizing USD 139.2 million in domestic revenue.
These registered improvements are just a result of consecutive reform initiatives spurred by the leadership. The following measures were taken toward realizing improving government revenue performance:
a) Significant investment in human and institutional strengthening:
The immediate actions taken to identify gaps in the domestic revenue were massive and quite a number of challenges have been identified, however, not all of those challenges could be remediated in such a short period of time as such demands continuity of management. But since Somalia’s tax system is characterized by weak collection capacity, the leadership was encouraged to take actions towards strengthening staff capacity, reform the institutional arrangement of tax collection, initiating reform programs targeted to the revenue department and enforcing new tax compliance through cabinet approval.
To this end, more than hundreds of municipal police tax collectors have undergone several trainings to enhance their skills and to improve their disciplines. Course contents covered areas of customer satisfaction skills and the best ways of dealing diligently with business people. The civilian tax collectors similarly benefited same enhancement capacities. Despite these, security challenges remain precarious as tax collectors frequently are targeted and killed.
Additionally, the revenue department was substantially reformed by creating specific divisions that are aimed to increase deliverables. Unlike the previous system, existing divisions—the Inland Revenue and the customs departments now report to a revenue director responsible for overall management of the domestic revenue. This was done as a result of enforcing departmental coordination and smoothing level of responsiveness to the people. The department is also responsible for formulating policy guidelines, assessing laws and regulations to support revenue mobilizations and analyzing the Somali economy and potential revenue sources for maximizing revenue outturn numbers.
On the other hand, programs to support the revenue mobilization were unleashed and funded through Multi Partner Fund program run by the World Bank. Programs that target revenue enhancement initiatives are sort of Technical Assistances in tax policy, revenue mobilization and tax administration as well as port modernization programs. On account of realizing the implementation completion of these assignments, sustainable revenue collection practices would and can be materialized to lead growth and economic stability; which would then create a charming transition to the next management. As Minister, Farkeeti echoed this inspirational vision on 27th October in his thankful remarks at the ceremony of the opening of the renovated building of the Ministry of Finance; it is already evident that many of his dreams were either fully or partially achieved
b) Enhanced payment system:
The range of diagnostic analysis undertaken by the leadership for the last two years further included the enhancement of government payment system that was not dared to be strengthened for a while. Country payment systems have been strengthened today with the introduction of the electronic payment system, direct vendors payment and scale up of the Somali Public Financial Management Information System (SFMIS) as well as the introduction of a commitment control —that government institutions ought to seek budget approval before they order purchasing and commit to expenditure. Expenditures incurred before budget approval was always a challenge to the government and created accrual of arrears, however, it seems now that compliance to this decree is getting momentum among government institutions.
The traditional system of purchasing office materials accustomed by the institutions is going to be obsolete with the enforcing of the usage of the payment transparency and the adherence of proper procurement process. The PFM coordination unit at the Ministry of Finance is instrumental for this development and is further scaling up considerable reforms across government institutions to consolidate government effort to adopt an established procedure. Furthermore, passage of the procurement bill by Parliament and the subsequent assent by the President helped facilitate the implementation of the country’s procurement approach too.
Nevertheless, the reform in the payment system is greatly strengthened with strong leadership commitment and strong will endeavor by the Ministry’s leadership. The SFMIS has enabled an automated processing and recording of all government transactions, thus enabling the government to report in transparency to the Parliament and to the Somali people.
IMF engagement and Staff Monitored Program
In the effort of rebuilding the economy, the leadership was substantially encouraged to move toward normalizing relations with International Financial Institutions (IFIs) for the objective of consolidating achievements already realized and to take Somalia closer to the International Forums. Besides an earlier engagement with the World Bank and the African Development Bank, normalization with IMF is also concluded in 2015. Under the agreement of IMF, a reform program of a period of one year that focuses on implementing prudent macroeconomic policies and strengthening institutional capacity for macroeconomic management was launched.Eventually, meeting the reform programs envisioned in the IMF agreement would enable Somalia to obtain debt relief and arrears clearance with IFIs.
Somalia’s renaissance is on an inception phase. Reform programs have been unleashed across several government institutions and the Ministry of Finance is one of the significant institutions that need to be reformed. So unleashing such reform programs was one of the dreams of the out-going Minister of Finance. At least few of his dreams were notably realized before government reshuffle, which in turn required an interrupted management so that achievements made the last two years could be strengthened.
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