The state of fiscal decentralization to local governments in Somalia

Governance Briefs

Decentralization has been emerging as a policy issue in Somalia since 2012. However, it has not been a dominant concern, in comparison to other problems that have overwhelmed policy forums of the executive and legislative branches in both the Federal Government of Somalia (FGS) and the Federal Member States (FMS). One expectation from the federal arrangement was that power would be decentralized to lower levels to enable local communities to effectively participate in deciding matters of their particular concerns, including devising local-level policies that reflect their immediate needs, such as the collecting local taxes and provision of essential services. However, these expectations remain an unobtained dream as new and long-standing local governments in FMSs still don’t engage in collecting taxes that are, in theory, set out in their respective local government acts. Instead, only the Finance Ministries of the FMSs collect revenue, and this rendered local governments largely nominal structures that are unable to respond to the needs of their constituencies. This governance brief sheds light on the state of fiscal decentralization in Puntland, Galmudug, and Benadir. The brief specifically analyzes the budgets they operate; the financial systems they use for collecting and dispensing expenditure; and whether there are fiscal transfers from state governments to local governments. The brief also highlights key obstacles to fiscal decentralization in local government. Lastly, the brief recommends, among other things, that FMSs provide fiscal transfers to local governments to be able to deliver some services to their population and set deadlines for the devolution of fiscal powers to local governments to collect taxes and translate these into services.

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