Following more than two decades of conflict, a new federal government emerged in Mogadishu in 2012 within the framework established by the Provisional Constitution. Soon after, the international community agreed to the Somali New Deal Compact–an organizing framework (2014-2016) for assistance delivery to the country—with the Federal Government of Somalia (FGS), in line with national priorities, increasing delivery through Somali institutions.
The compact was succeeded by the New Partnership for Somalia in 2017, following a peaceful transition of power in February 2017. The New Partnership for Somalia, followed by the Somali Partnership Forum in Brussels in July 2018, aligns with the National Development Plan, and outlines collective priority areas critical for development, including humanitarian issues, national security, inclusive politics, and economic recovery.
Somalia’s real gross domestic product (GDP) growth weakened in 2017 due to the severe drought. Although Somalia averted widespread famine in 2017, the drought led to large-scale food insecurity, affecting more than six million people. More than half of the population lives in poverty and a large proportion is sensitive to negative shocks. Real GDP growth declined to 2.3% in 2017, compared to 4.4% in 2016. Economic activity is mainly anchored in agriculture and the services sector. The agriculture sector experienced near total collapse with crop failures, a widespread shortage of water and pasture; and increased livestock mortality. Inflationary pressure increased in 2017 due to drought driven by significant increases in crop prices.
Implementation of fiscal policy has significantly improved, but challenges remain. Domestic revenue grew by 26.5%, from $112.7 million in 2016 to $142.6 million in 2017 driven by trade taxes. Donor grants almost doubled to $103.6 million in 2017 from $55.3 million in 2016 – a remarkable performance with 85% of the commitments being realized compared to only 50% realized in 2016. Despite the improved performance, the government is still struggling with basic challenges in its fiscal operations. Recurrent expenditures account for almost all expenditure, with capital spending accounting for just 3% of total spending in 2016 and 2017. Weak expenditure controls result into ad hoc cash rationing to ensure balanced budget and zero accumulation of arrears hence, affecting overall budget execution. Current spending priorities focus on the security and administrative services which account for almost 90% of total spending hence crowding-out provision for the economic and social services.
Last Updated: Nov 12, 2018