Future of Government | Report | Debates | Case studies
Following the resignation of the Governor of the Central Bank of Somalia in 2013, citing corruption concerns, there was widespread recognition that a new approach to strengthening financial governance was needed to improve confidence in government in Somalia. “Business as usual” would not suffice. Somalia’s Financial Governance Committee (FGC) was established in early 2014 by mutual agreement between the Federal Government and the international community to provide a high-level forum for dialogue and strategic independent advice.
Although initially conceived of as a short-term mechanism, the Committee has met regularly ever since. It is chaired by the Minister of Finance, with participation from the President’s Office, Prime Minister’s Office, Central Bank of Somalia and international representatives of the World Bank, African Development Bank, IMF, and European Union (on behalf of bilateral donors).
The Committee’s agenda covers fiscal federalism, natural resource revenue management, domestic revenue mobilization, public procurement and concessions, expenditure management (including the security sector), financial sector development and asset recovery. It also reviews and advises on all government contracts above USD $5 million in value and all concessions contracts. To date, it has reviewed over 50 government contracts.
Government reform commitment and the cross-institutional nature of its membership have been central to the Committee’s success. The federal government has showed continued willingness to receive advice on sensitive issues and act even when doing so has required important political capital. The long-term nature of the Committee’s engagement is also a factor in its success: in some cases, it has taken years of sustained effort spanning three different Ministers of Finance and two different administrations, to advance reforms and resolve problematic contracts. The committee’s model promotes institutional coordination, reducing information asymmetries, and building consensus between economic decision-makers across government. Moreover, decisions are taken on a collective basis, which (in this setting) made it more likely that they will be enforced.
Although the Committee is by design both voluntary and advisory, it is clearly understood that the international community expects the Committee to be listened to. International delegates act as impartial experts who can speak to government counterparts on a peer-to-peer basis, at arms-length from their sponsoring development partners. Over time, as the FGC has consolidated its reputation as a trusted advisory mechanism, it has been able to move towards providing ex-ante rather than ex-post advice.
The FGC has achieved significant results, including supporting a shift toward competitive procurement; strengthening accountability in the payroll; improving fiscal terms of concession contracts; and addressing strategic topics for the fiscal future of Somalia, such as constitutional arrangements for revenue sharing, legal provisions for borrowing, and natural resource revenue management.
The committee played a crucial role in reducing defense spending. It helped the government apply cabinet directives following the identification of ghost soldiers which resulted in a 78 percent reduction in the quantity of rations in one security agency. Several repeated attempts were required to reinstate the competitive tender of army rations, and reform the delivery of fresh rations and wages away from bags of cash toward direct payments of soldiers. As a result, government expenditures on defense food could be nearly halved, and leakages were reduced. Annual savings are equivalent to about 3.5 percent of the total domestic revenue base in 2019.
But perhaps more importantly, shifting the terms of one of the biggest deals the government makes, helped signal that further reforms are possible if a good-enough coalition is built, if there are persistent focuses on deals - rather than just fidgeting with plans and rules -, and if authorizers remain on board. Change is possible even in the most challenging contexts.
Drawn from The Fight Against Corruption.
