Finance Minister to increase domestic borrowing to meet budget deficits
Finance Minister Abdirahman Beyle will today present the first national budget in the new administration to finance the president’s pre-election pledges and notably offset deficits four months after the end of the 2015 financial period.
Both President Mohamed Farmaajo and PM Hassan Khaire have, since taking office tabled ambitious economic recovery blueprints some of which will require huge financial commitments and robust domestic borrowing.
Somalia is not eligible to credit in the international financial markets forcing it to rely on donor funding, diaspora remittances and domestic revenues.
In the 2016 financial budget, then minister Mohamed Adan Fargetti submitted a $246, 307, 948 national budget. Out of this, the minister set the total government revenue at $139,221, 120 with domestic borrowing expected to generate $107,771, 120.
Turkey, the only listed bilateral support donor for the 2016 budget injected $30,043,387 while multilateral donor support through project funding amounted to $77,043,441.
The multilateral donors included the African Development Bank, World Bank among others.
Salaries for public servants and other government officials took the largest share of the 2016 budget totaling $52,970,191 followed by the Somali National Army which was allocated $35,469,640. Fargetti also awarded the police the third largest share of the budget at $13,947,560.
The 2016 national budget was increased almost by $50 million from the previous year which saw the government propose a $199,033,838 budget.
This year’s budget comes in the backdrop of a severe drought which is fast transitioning into a famine. The minister will be expected to increase support for drought relief efforts to supplement domestic and international support.
Key will also be the security sector. One of President Farmaajo’s flagship projects in line with the pre-election pledges is building a strong and professional army alongside other elements of the country’s security architecture.
Somalia has an estimated 20,000 National Army force trained and funded by among others the African Union, EU and the US. Turkey is set to open a military academy this year in Mogadishu which is expected to bolster the training and equipping of the force.
The socio-economic sectors are also expected to get increased funding. The president pledged to reverse the deadly immigration missions by Somali youth which have cost lives and robbed the country of its workforce. Funding for opportunities which ensure job creation particularly among the youth is therefore an area the finance minister will have to direct resources.
To actualize his budget however, the Finance Minister will have to raid the domestic market the more. Establishing a viable and effective tax regime is crucial to realise domestic borrowing. The minister will also need to expand the tax bracket and put in place stringent measures to ensure taxes are not siphoned off by corrupt networks in government.