Economic and Financial Governance Institutional Support Project


Overview

  • Reference: P-SO-KF0-001
  • Approval date: 18/12/2013
  • Start date: 02/04/2014
  • Appraisal Date: 06/09/2013
  • Status: OngoingOnGo
  • Implementing Agency: GOVERNMENT OF SOMALIA MINISTRY OF FINANCE
  • Location: MOGADISHU

Description

The project is a centerpiece of the Bank's continued and early re-engagement in Somalia to support its transition out of conflict. It builds upon previous Bank supported PFM reforms in Somalia. "The overarching objective of the project is to strengthen macroeconomic and financial management in Somalia through the setting up of an improved macroeconomic and budget framework that is conducive to fiscal discipline, and strategic and efficient allocation and use of public resources "The project has three (3) mutually reinforcing components including:

(i) enhancing policy, planning and economic analysis;

(ii) strengthening of the Budget process; and

(iii) PFM capacity building and project implementation. Component

(iii) includes the provision of TA, to enhance project management and the provision of essential equipment and ICT. The expected outputs of the EFGP include:

(i) preparation of a macro-economic and fiscal framework underpinning resource allocation;

(ii) drafting of costed gender sensitive sector strategies;

(iii) external debt reconciliation;

(iv) establishment of a budget calendar;

(v) comprehensiveness of budget information and inclusiveness and participation in the budget process; and

(vi) strengthened PFM capacity.


Objectives

The project objective is to improve the process of budgeting in order to ensure optimal allocation of public resources.


Rationale

The project is aligned with the Government's "Foundations of New Beginning: Six Pillar Policy"; particularly pillar one that deals with good governance. The design of this operation has also benefited from public financial management reform priorities stipulated in the 2013 Budget Framework Paper and the PFM Action Plan. The Action Plan identifies enormous functional and capacity weaknesses across the PFM system, including huge budget variations, lack of expenditure controls, and lack of uniform budget classification. The operation is also consistent with the Somalia Country Brief 2013 - 2015, which has a pillar on strengthening governance and capacities, which includes PFM reforms and strengthening government's policy planning and implementation capacities.

The core development issue to be addressed by the project stems from the extreme fragility of the Somali state and the enormous deficit in human and institutional capacities. In order to maintain the momentum towards the consolidation of peace and security in Somalia, the new government needs to establish its legitimacy quickly demonstrate that it can deliver services for its citizens and fulfil core state functions. The significant weaknesses in the PFM systems documented in paragraph 8.1.4 are a key impediment to state building, while establishing basic budgeting systems to raise and allocate public resources transparently, strengthening the government's essential capacities, as proposed in this project, is a step in that direction. The re-building of functioning government institutions and processes is central to the return of stability and security in Somalia at all levels. The Bank brings a key contribution in this area through its experience both in fragile states and in particular, public financial management.

The programme will also contribute to the process of re-engagement with the international community, especially supporting the process towards arrears clearance. Re-establishing a basic budgeting function is a key step as it would create the foundation for the FGS to agree an IMF Staff Monitored Programme. As a regional institution and one of the creditors, the Bank is well placed to contribute to this process.

Finally, the security environment in Somalia is high risk, and constrains project execution. As an African institution with an ability to tap into a pool of regional and local expertise, the Bank has a comparative advantage in operating flexibly in such an environment.


Benefits

The Project aims to strengthen government capacity in the budgeting process and resource allocation towards policy priorities. This will enhance the impact of the national budget on the delivery of services and hence poverty reduction through increasing efficiency and effectiveness of resource allocation and execution in line with pro-poor policies.

By putting in place a basic system of resource allocation, the project will enable the Government to allocate resources to policy priorities, including gender, in a meaningful manner. Elements of gender budgeting will also be incorporated in the design of budget guidelines and processes. At the operational level, the project will target a gender balance in the list of candidates for proposed training course


Key contacts

KARAMAGA Camille - OSGE2


Costs

Finance source Amount
ADFUAC 2,500,000
TotalUAC 2,500,000