Review of 2020 federal government budget for security, economic growth and public services

Review of 2020 federal government budget for security, economic growth and public services

On the last day of December 2019, a joint meeting of the House of the People and the Upper House of the Somali Federal Parliament approved the 2020 federal government budget. It was the first time since its formation that the Upper House participated in the approval of the national budget. The theme of this year’s budget is ‘strengthening economic growth and security’.

The total budget appropriated for fiscal year 2020 is $476 million, a $132 million increase (38 percent) over last year’s $344 million budget. This is another huge annual budget increase, after 2019’s $70 million (25 percent) increase over 2018’s $274 million budget.

Expected domestic revenue of $234.4 million will be generated mainly from tax on income, profits, capital gains, goods and services, and international trade and transactions. Expected domestic revenue generation is $44.5 million (23 percent) higher than 2019’s $189.9 million, itself only $17.4 million above the $172.5 million for 2018.

A total of $231.8 million donor revenue – including budget support ($109.5 million) and project support ($122.3 million) – is expected to complement domestic revenue. This is a $77.5 million (50 percent) increase of the donor revenue from 2019’s $154.3 million. Although the overall budget has increased, the government’s contribution is only $2.6 million higher than donors’. Despite the ‘strengthening economic growth and security’ theme, the approved budget still indicates dependence on fiscal support from other countries and international organizations. However, the increase of donor funding is an indication that donors are gradually starting to use the country’s own systems and that the government is trusted with the management of close to $80 million in extra resources.

Some $155.3 million (33 percent) of the 2020 budget goes to employee compensation. Another significant portion of the budget (146.8 million or 31 percent) goes to defense and security sector institutions, which is a $36 million (32 percent) increase over last year’s $110.8 million budget appropriation. A record of $106.4 million (22 percent) was allocated for economic development ($41.9 million) and social services ($64.5 million). This is a vast increase, more than doubling the $50.8 million aggregate 2019 budget for economic development and social services.

Investment in defense and security institutions

From the $146.8 million allocated overall, $83.9 million goes to defense and $62.9 million to security institutions. The defense budget has increased by $17.5 million (26 percent) from the 2019 budget of $66.4 million. The $18.5 million (42 percent) increase in the security budget over 2019’s $44.4 million. The defense and security budget increase is in part a reflection of a $70 increase of the Somali National Army salary from $130 to $200 per month.

Of the $83.9 million defense budget, $1.2 million goes to the Ministry of Defense. Interestingly, this is a $1.4 million reduction from the Ministry’s $2.6 million budget in 2019. The majority of the defense budget ($81.1 million) goes to the Armed Forces; in 2019, the armed forces had a budget of $62.2 million. The Military Court receives $1.5 million budget, same as its 2019 budget. The orphans of the deceased armed forces and disabled forces were appropriated a mere $115,000, also the same budget as in 2019.

Of the $62.9 million budget for security, the Ministry of National Security experienced a budget reduction, but not similar to that of the Ministry of Defense: $1.8 million budget goes to the Ministry, a $174,780 decrease from last year’s $2 million budget. The National Security Forces including the police and NISA were appropriated a budget of $14.5 million. Another $4.6 million goes to the Immigration Department.

It is encouraging that over 30 percent of the 2020 budget is appropriated for spending on security. Insecurity remains one of the main challenges in Somalia. However, it is not yet clear how the budget increase in defense and security will contribute to the overall security of the country.

Priorities for social services

The 2020 federal government budget allocates $64.5 million (almost 14 percent) for social services. This is a significant improvement that should be commended. It is more than double ($38.1 million increase) last year’s $26.4 million budget appropriation for all social service ministries.

Most of this budget increase goes to the education sector, which has been allocated $21 million (compared to $16 million in 2019 and $8 million in 2018). The education budget, which reflects the trust of international donors supporting education through the country’s system, is shared by the Ministry of Education, Culture and Higher Education ($15.1 million), Somali National University ($4.9 million), Somali Academy of Science and Arts ($646,271) and Intergovernmental Academy of Somali Language ($328,060). The Ministry’s budget has increased substantially, growing from $4.5 million in 2018 and $10.4 million in 2019 to $15.1 million in 2020. This is a good indication that education has been consistently a priority for the incumbent government. A portion of this fund goes to 24 public schools in Mogadishu managed by the Ministry.

The health sector receives a $9.4 million budget in 2020 up from $7.3 million in 2019 and $4.4 million in 2018. This is a modest increase in the sector, but it remains to be seen how this budget rise will improve access and quality of healthcare from public hospitals. Although the government took over the management of a number of public hospitals in Mogadishu, access to emergency health services is scarce in Somalia and citizens – including those in Mogadishu – are largely dependent on private hospitals.

The Ministry of Labor and Social Affairs receives a staggering $32.5 million budget in 2020. The Ministry received a mere $1.5 million in 2019 and $1.4 million in 2018. The increase is surely a reflection of the project support of the donor community. Other social service ministries receive meager funds. The budget appropriated for the Ministry of Women and Human Rights ($1 million), including Somali disability Agency, and the Ministry of Youth and Sports ($625,396), indicates that youth and women ministries remain under-funded.

The $64.5 million for social services is surely not sufficient to meet the myriad demands for quality and affordable public services in Somalia, which was either nonexistent or poorly delivered over the past three decades. However, it is a very positive and vital increase over 2019 in absolute and proportional terms (up from 8 to 14 percent). That the budget for social services increased from a mere $8.3 million (2017) to $64.5 million (2020) in three years gives hope for the future of social service delivery in Somalia.

Revenue generation

The 2020 federal government budget allocates $41.9 million (almost 9 percent) to the economic development institutions. This represents a significant increase of last year’s $24.4 million and $20.3 million in 2018.

Close to $6 million in total was allotted across the Ministries of Water and Energy ($3.4 million, from $1.3 million in 2019); Agriculture ($1.5 million); and Livestock ($1 million). Slightly more than $2 million goes to the entire marine industry. The Ministry of Transport and Aviation including Civil Aviation Authority budget has been significantly increased from a mere $3.1 million in 2019 to $14.2 million in 2020. There were modest increases for the Ministries of Post and Telecommunication (including the National Telecommunication Authority) ($4.9 million), Commerce and Industry ($2.2 million), Public Works and Reconstruction ($4.1 million), and the Ports authority ($2.3 million).

Although the total budget was increased by $132 million in 2020, the domestic revenue generation is still low and key economic development sectors such as the livestock are under-funded. Investing in economic institutions would create job opportunities for the high number of unemployed. Such spending would likewise increase domestic revenue, as the government would be able to collect different kinds of tax.

Future outlook

It is encouraging that the budget appropriation for security, social services and economic development institutions for 2020 has significantly increased. The total budget increase of 2020 is also encouraging. In eight years, $362 million was increased to the annual government budget ($114 million in 2013; $118 million in 2014; $135 million in 2015; $171 million in 2016; $260 million in 2017; $274 million in 2018; $344 million in 2019; and $476 million in 2020). With the ongoing debt relief efforts, the expectation is that the annual budget will experience another major increase in 2021.

That said, the budgets for 2018 (2019 budget to be closed by 31st March 2020) was not closed and there is no clarity on whether the appropriated budget were used as planned. Enhancing accountability and transparency should be equally prioritized. Security, social services and economic development are surely key priorities for the Somali citizens. Investing in them will increase public trust and government legitimacy.

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