Panic as Somalia's federal states suspend cooperation with Ministry of Finance

MOGADISHU, Somalia - The relationship between Somalia's federal states and the central government may hit a bottom low for the first time in three months, following the latest conflict involving the member states and the federal government's Ministry of Finance in Mogadishu.

A statement released on Wednesday indicated that regional ministries of Finance had ceased cooperation with the federal government, citing breaching of various agreements on resource allocation across the country which has been a thorny issue.

The feud between the two entities comes a month after World Bank approved $100 million in support of Somalia's fiscal policy reforms with the aim of reaching the Completion Point of the Heavily Indebted Poor Countries [HIPC] Initiative.

To this effect, the member states maintained, that they have suspended cooperation until a number of "unconstitutional" decisions are reversed by the government of President Hassan Sheikh Mohamud, who was elected barely three months ago.

The latest conflict comes just months after Hassan Sheikh Mohamud pledged to streamline the working relationship between Mogadishu and federal member states. The matter had been existing and had substantially deteriorated during the reign of Hassan Sheikh Mohamud.

Interestingly, the mischief between the states and federal government comes days after Jubaland President Ahmed Islam Mohamed Madobe extended his term in office, just months after his Southwest counterpart Abdiaziz Lafta-Gareen chose to extend his term in office.

The statement noted that the suspension will be in place "until such a time FGS Ministry of Finance returns to the framework of the law and begin implementing of the terms of the agreements stated above". The statement was issued upon consultation among the state's leadership.

Ahmed Mohamed Hussein, the Southwest Minister of Finance, accused the federal ministry of finance of unilaterally executing his mandate without consulting federal member states as required by the law.

The previous agreements legitimate in question according to the state's finance bosses include the Addis Ababa agreement of 2019, the Kismayo cooperation of November 2019, and the Kampala agreement of 2019. Others include the Nairobi agreement of January 2020 and the Mogadishu agreement of August 2020 all legitimate for five years.

Investigations by Garowe Online established that the major reason behind the latest stalemate is significantly related to sharing of international aid within the country. Prior to the announcement, a message had been sent from the parent ministry was showed that there was $2 million to be shared among the states.

However, the amount was much less than what had been agreed in principle, and figures indicated more money had been disbursed by international donors. Last year alone FGS received from the donors a sum of $55 million and the five FMS along with Somaliland got more than $30 million dollars.

In the sharing formula, Somaliland received $11 million, while Puntland was given $9 million and the others received between three to four million dollars.
This year, Somalia received $100 million from the World bank thus the latest controversy.

Source further intimated to Garowe Online that former Finance Minister Abdirahman Beyle gave his successor the recommendations on the payments to the FMS, which seems to have been implemented now. The allocation of these funds to subsidize the budgets of the Federal Government and Somali authorities is part of the World Bank's debt relief program in Somalia

Analysts believe that the latest predicaments could undermine Hassan Sheikh Mohamud’s government whose first 100 days ended without any tangible progress in overcoming the challenges facing the troubled Horn of Africa nation. The president had pledged to substantially reform the current state of affairs.

The operation, World Bank had said, supports the government’s efforts to improve fiscal transparency and increase revenues through the harmonization of customs regimes across the federation and improving the governance of intergovernmental fiscal transfers.

Further, these efforts will help create fiscal space to allow government authorities to respond to the deteriorating drought situation and rising prices for food, fuel, and other staple products. Together, these efforts will help improve the government’s ability to continue to provide cash transfers for the country’s poor and most vulnerable, including women, which are a critical coping mechanism amidst continuing shocks.

“This operation will increase the government’s fiscal space to respond to the drought situation while continuing to support reforms that advance progress towards attaining debt relief,” said Kristina Svensson, World Bank Country Manager for Somalia

The country decided to adopt the federal system where member states get a share of the revenue for the purpose of development. This has been a major step towards the realization of peace and stability within the Horn of Africa nation which has been struggling with instability.

GAROWE ONLINE