Is the time ripe to review Puntland Public finances?

By: Farah B. Osman

I have watched a session at Puntland Parliament in which MPs asked the Finance Minister, Hassan Shire Abdi, questions about the 2019 budget unveiled in November. The Minister has given an excuse for not being able to answer questions about the new budget. He said that he had no a clue as to how the budget had been prepared.

I have studied the  new budget. Since 2020 is just around the corner. Puntland parliament has passed the budget. My discussion will revolve around three aspects of the budget.

For a comparison reason my analysis will partly rest on the temporary budget passed in April 2019. The total of the monthly revenues forecasted was US$ 14.78 million ( US$ 133.03 million for nine months ending December 2019.).

US$ 6.06 million of the forecasted revenues were domestically generated. US$ 8.15 million was external revenues, whereas US$ 583, 000 is forecasted revenues from generated local governments. There was no a subsidy from the Federal Government of Somalia. Incremental approach has been used to prepare the budget. Hence there is marked overstatement to offset expenditures – a reason the Finance Ministry of Puntland has adopted expenditures approach in the course of preparing the new budget.

1. Budgetary imbalance: Expenditure allocations within budget items

Domestic revenues forecasted for nine months ( April – December ) amounts to US $ 54 million. Forecasted expenditure is based on the forecasted revenues. US$ 48. 9 million had been allocated to cover salaries and fringe benefits, services equipment and sundry expenses.

From the above data one can infer that 89.9% of domestic revenues get incurred as expenditure. 11% of the total expenditure will go to public services.  Ministries that directly contribute to the economy – Ministry of Livestock, Ministry of Agriculture, Ministry Commerce, Ministry of Tourism, and Ministry of Ports – have not been given a share in the public service budget allocation.  Youth organisations, women’s organisations, cultural and sports activities have not received budget allocations in the new budget.

Recurrent expenditure estimates of government organisations stands at US$ 6.05 million per month, 41.3% of which has been allocated to the Presidency and the Finance Ministry.  Forty organisations of Puntland State share the remainder.

Allowances outside salaries and non-monetary benefits granted to the Finance Ministry and Presidency amount to US% 653, 430 ( for nine months). This allocation dwarfs US$ 575, 000 – the total budget of nine months for the Ministry of Justice, Ministry Livestock, the Office of the Auditor General, and the Office of the Attorney General.

The monthly domestic and foreign travels of the Finance Ministry is US$ 70,000, that is 50% more than the total domestic and foreign travels of the rest of the  government agencies (US$ 35,700) . Forecasted hospitality expenditure at the Presidency stands at US$ 112,625 per month that is 16% more than the general expenditure for the judiciary of Puntland.
·         Expenditure for publicity and advertisement for the Finance Ministry amount to US$ 40,000 per months compared to US$ 30,200 earmarked as monthly expenses for the Office of the Auditor General. More than forty people are on the payroll of the Auditor General’s office.

2. Lack of clarity in the budget.

The budget allocation for Puntland Dervish Forces amounts to US$ 1.39 million, making the Force second organisation to have received  generous appropriations next to the Finance Ministry.  However, repeated mutinies of the Dervish forces raise questions about how Puntland government pays salaries of soldiers.

Included in the general government expenditure is US$ 8.155 million classified as external revenues. This income consists of donations from international organisations and the World Bank. The forecasted government expenditure noted it as general expenditure, unlike recurrent expenditure. It does not get channeled through the bank of the government. In addition, there is no an official report on donations Puntland receives. It is the remit of the Auditor General to publish a report on donations that Puntland receives.

3. How Puntland Public Finance Authorities Work

 The management of Public Finance Agencies consist of agencies independent of each other but that collaborate. Puntland public finance agencies are the Ministry of Finance, the Government Bank, the Accountant General and the Office of the Auditor General.
·       Puntland Public Finance Authorities are fully formed organisationally but their work is not balanced. This has caused collective poor performance, with the Accountant General and the Office of the Auditor General bearing the brunt of underperformance.                                  

The World Bank funds Capacity Injection Project and Somalia PPF Capacity Building. Those projects help Puntland modernise its public finances processes. The World Bank commits US$ 11 million per annum. However, public finance system of Puntland predominantly uses paperwork. Puntland has not fully transitioned its public finances system into an electronic system. With those projects nearing completion, how Puntland has benefited from the timely financial and technical assistance of the World Bank is a question worth asking.

In conclusion, transparency, monitoring and accountability are necessary conditions for good governance. The time is ripe for a conversation about the state of public finances in Puntland.

Farah Bashir Osman is co-founder of Haldoor Forum. His commentaries have appeared  in major Somalia news websites.