Mogadishu (Agencies + Diplomat.so) - Somalia is eyeing funding from the International Monetary Funds as budgetary estimates reach $1 billion mark for the first time in history. According to financial proposals endorsed by the country's Council of Ministers this week, the budget for the next fiscal year will reach $1,025,687,991, exceeding last year's, if the federal parliament approves the estimates.
Somalia Minister for Finance Bihi Iman Egal indicated that the budgeted amount for 2024 fiscal year will be raised through domestic revenue and international grants.
Last year, parliament passed a budget of $973,985,805.
But Egal said it was subsequently increased "due to allocations for government healthcare services, education, and security”.
It is expected that legislators will alter some allocations especially in the security sector as Somalia enters Phase 2 of the battle against Al Shabaab and plans to take over security roles from the departing African Union Transmission Mission in Somalia (ATMIS).
The Council of Ministers this week underlined that domestic revenue collection has grown by 20 percent, benefiting improvement of national security and delivery of social service.
The government split its total budget of $1,025,687,991, into two: A permanent budget accounting for 51.7 percent and capital budgeting amounting to 48.3 percent.
The latter refers to new areas of investment to shore up economy. The former is for recurrent expenses.
On Wednesday, Somalia was granted relief and an additional $100 million financing under a three-year Extended Credit Facility (ECF) arrangement from the International Monetary Fund (IMF) after Mogadishu committed to further economic reforms.
The financing, which is still subject to the fund’s Executive board approval, follows the considerable progress that Somalia has made in rebuilding its economy and institutions under the current ECF-supported programme since 2020.
"Somalia has maintained strong implementation of wide-ranging reforms to help strengthen key economic and financial policy institutions,” IMF team leader, Laura Jaramillo said in a statement last week.
Somalia says it intends to source funds from internal revenues to foot at least 35 percent while the remaining 65 percent is from external grants.
The internal revenue is divided into two; revenue from taxes estimated to amount to 24.5 percent and non-taxable income such as fees on government services and licensing charges as 10.5 percent of the internal sources.
The document will have to be debated in the federal parliament. But the draft shows that the general costs such as salaries and rents of the state administration business will comprise most of the fixed expenses consuming 51.7 percent, while project costs spend 48 percent.
After chairing the Council of Ministers meeting on Sunday, Somalia Prime Minister Hamza Abdi Barre said the proposals are closely associated with the needs of the country, especially in responding to the efforts to attain debt relief.
"Our expectation is the country’s debt is forgiven by the end of the year, the budget further increasing, enabling the government to enhance its services to the people,” PM Barre said.
Each of the five federal member states of Somalia such as Puntland, Galmudug, Hirshabelle, South West and Jubbaland will table own budgets, however. Generally, they are to be assisted by the Federal Government.
The IMF team that conducted discussions with Somali authorities in Nairobi (Kenya) during September 11-22 and October 22-24 however noted that despite the progress achieved Somalia still faces significant challenges ahead including those stemming from economic, social, security, and climate risks.
In Somalia, growth is currently insufficient to reduce widespread poverty, address large social needs and create sufficient jobs for the youth.
According to IMF Somalia’s post-HIPC policy priorities will be to maintain fiscal sustainability, increase domestic revenues and strengthen public financial management, promote financial deepening and financial inclusion, improve business environment and governance and enhance statistics.