The project is critical to support FGS to ensure more efficient PFM practice that will be needed to handle the increased external support and complexity of development financing that Somalia may receive after reaching the HIPC completion point. Somalia has made good progress in the area of financial transparency and accountability; but further action is still needed. A basic fiscal framework - supported by an annual budget process, regular fiscal reporting and improved cash management capacity - has been established by the FGS. The overall Ibrahim Index of African Governance (IIAG) score improved from 8.0 out of 100 in 2013 to 19.2 in 2019. However, the Bank’s CFRA conducted in 2020 has identified five PFM challenges and fiduciary risks: (i) instituting PFM fundamentals for budget credibility; (ii) effective budget execution and financial accountability; (iii) improving policy formulation, planning and budget preparation; (iv) institutional structures; and (v) sound public debt management and transparency. In addition, essential central institutions such as the Ministry of Finance (MoF) and other ministries suffer from significant capacity deficiencies due to inadequate physical infrastructure, and financial and human capital resources. Addressing these identified areas require significant technical and financial assistance, given the current tight fiscal space, with extremely limited capacity to raise revenue. Therefore, this operation is in line with addressing the challenges identified in the CFRA.

Somalia

African Development Bank Group

Africa MENA Countries Sub-Saharan Africa

Railways-Rail-Railroad Construction Energy-Power and Electrical Computer Hardwares and Consumables

28.11.2021

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