SOMALIA

The Republic of Somalia was created on 1 July 1960, after merging Italian Somalia that had just gained its independence and the British protectorate that had itself become independent on 26 June 1960. After its independence, the country adopted a centralised system of governance. The constitutional order was then overthrown in January 1991, plunging the country into a protracted civil war. The collapse and absence of a central authority led to the emergence of autonomous and semi-autonomous states in Somalia. These states have formal government structures that resemble those of the modern nation-state, with judiciary, executive and legislative branches. In a bid to re-establish a national-level government, an internationally-backed transitional government of Somalia was established in Mogadishu in 2004. To accommodate the emerging semi-autonomous states, this transitional government took on a federal form of government and eventually led to the formation of the federal government of Somalia (FGS) in 2012.

The Somali national constituent assembly (NCA), composed of 825 delegates identified and nominated by the clan elders, endorsed the provisional constitution (PC) of the federal Republic of Somalia, on 1 August 2012. The government of Somalia comprises an executive president, a cabinet and a bicameral parliament. The president of the FGS is elected by a minimum of 2/3 of the members of each House of the federal parliament, and holds office for a four-year term. Article 48 of the PC describes the structure of the state and its two levels of government which are the federal government (FGS) and the federal member states (FMS). There are currently five FMS, which include Puntland, Jubaland, and Galmudug (since 2015), Hirshabelle (2016) and South West State (2014). Somaliland is an autonomous territory and is in practice separated from the FGS.

The FGS enjoys de jure sovereignty over Somalia but exercises de facto authority only over the capital Mogadishu, and the relationship between the FGS and the FMS continues to be contested. In 1991 and 1998, Somaliland and Puntland respectively broke away from central government control and established their own public sector institutions. Both states have adopted their own constitutions (in 2000 for Somaliland and in 2012 for Puntland), regulatory frameworks, president, parliament and executive and functioning of central and local levels of government. While Puntland is a semi-autonomous state that recognises the FGS, Somaliland operates as an autonomous state. The constitution of Somaliland states that it gained independence from the Republic of Somalia in May 1991, although the FGS contests this fact and the international community has not yet approved this secession. There is also contestation among the 5 states that recognise the FGS’s authority. In September 2018, through the council of inter-state cooperation (CISC), the FMS accused the president of the FGS of incompetence, broken promises and political interference among others and a month later, the CISC issued a self-reliance communique declaring a failure of the federal government. The CISC was set up in 2017 for federal states to discuss among themselves and negotiate with the federal government.

The functions of the state and local governments are not described in the PC, although Article 48 mentions that each FMS shall be comprised of a state government and local governments. Article 50 the PC provides for the principles of federalism, specifying that responsibilities, including revenue-sharing power, is given to the level of government where it is likely to be most effectively exercised according to the principle of subsidiarity. The PC does not specify the overall architecture, administrative, financial and functional arrangements of federalism, and modalities vary across states. Somaliland and Puntland were pioneers of decentralised local governance in Somalia, including a decentralisation policy (2013-2020) adopted in both states with the support of UN agencies. In South Central Somalia (where other FMS are located) there is no regulatory framework in place that describes the local government system.

TERRITORIAL ORGANISATION
MUNICIPAL LEVEL	INTERMEDIATE LEVEL	REGIONAL LEVEL	TOTAL NUMBER OF SNGs (2021)
193 districts		6 states
Average municipal size: 135 000 inh.
193		6	199

OVERALL DESCRIPTION: The country is currently divided into 6 states (of which the autonomous state of Somaliland, Puntland, Galmudug, Jubaland, Hirshabelle and South West) and 193 districts as self-governments and 31 regions at the deconcentrated regional level. According to the federal Ministry of National Planning, three states (Somaliland, Puntland and South Central), 18 regions and 98 districts were officially recognised before the disintegration of the country in 1991. There is also a special region, the Benadir Regional Administration (BRA), whose status has not been clarified in the PC. While in some documents, Mogadishu, the Capital of Somalia, is perceived to be part of BRA, it is presented as an autonomous territory in others.

Article 49 of the PC provides for the number and boundaries of the FMS and districts (the local governments in Somalia) and establishes that FMS boundaries shall be based on the deconcentrated administrative regions as they existed before 1991, a territorial division that UN and FGS documentation recognise. Article 49 (6) states that based on a voluntary decision, two or more regions may merge to form a new FMS.

REGIONAL LEVEL: States possess the basic required political and administrative structure to perform their functions. They have their own parliaments, whose members are selected by clan elders, as well as civil servants that are in charge of service delivery within the states. The executive arm is headed by a president elected by the members of each state parliament.

The first population census in Somalia was conducted in 1975, followed by another in 1986, whose results have never been officially disseminated. Population and land estimates from 2012 show that South Central Somalia (comprising the areas that later became three new FMS) included 63% of the population in 45% of the territory; Puntland counted 12% of the population in 33% of the territory and Somaliland, with 25% of the population for 22% of the territory.

Puntland recognises its adherence to the Somali government based on a federal system. The government is divided into the legislature (House of representatives), the executive (council of ministers) and the judiciary (the courts). The House of representatives consists of 66 members and their term of office is five years. The executive is composed of the president, vice president, the ministers, the vice ministers and all high public officials and staff under their direct authority. Article 56 of the Constitution of Puntland specifies the parliamentary form of government where the president and vice president are elected by the parliament. According to the legislation, elections for the House of representatives are made by universal suffrage but in practice, indirect elections through clan representatives have been the norm for parliamentarians and high executives.

Article 37 of the Somaliland Constitution specifies that the state consists of three branches which are the legislature, the executive and the judiciary. The executive consists of the president, vice-president and council of ministers. The president and vice president, jointly elected through a direct general election, serve for a five-year term for a maximum of two terms. The parliament is bicameral. The 82 members of the House of representatives are selected under secret ballot in a general election. The House of elders (Guurti) consists of 82 members who “shall be selected in a manner to be determined by law”. The latest parliamentarian and district elections were held in May 2021 and the Guurti, composed of Somaliland’s clan elders, is expected to be renewed through elections in May 2022, after having extended their five-year terms a few times.

In all four other new FMS, the process to elaborate the constitution is on-going and the system of governance has not been clarified yet. In practice, they closely follow the government system of Puntland each with a president elected by parliament, a legislature elected by clan representatives and an executive established by the president.

STATE TERRITORIAL ADMINISTRATION: There are currently 31 deconcentrated regions, although some of them have been contested. Regions typically have a population of between 500 000 and 800 000 inhabitants. While Somaliland was divided into 14 regions as of 2019, Article 7 of the Puntland Constitutions specifies that the state is divided into nine regions, both counts including Sanaag and Sool, which are claimed by both states.

Most services in key sectors of government, such as education and health, are delivered by state ministries through the deconcentrated regional governments that are extended arms of the state government. Many other services are directly delivered by agencies and donor programmes. Regional governments are led by a governor (selected by state governments in the case of Somaliland and Puntland) and the regional offices represent sectoral ministries. They are responsible for monitoring and overseeing the implementation of sectoral services at the district level by providing coordination between the state government and the decentralised units.

MUNICIPAL LEVEL: Following the creation of administrative units in Somalia, the number of districts, which evolves constantly, stands at 193. Districts have an average population of 135 000, with considerable variation between urban areas and more remote and rural jurisdictions. Administratively, districts are classified into different grades based on their size, local revenue potential and geographical coverage. In practice, however, grade A and B districts were created before the collapse of the regime in 1991. On the other hand, grade C and D (where they exist) are new districts, created by the current regimes. In most cases, grade A districts are large districts and regional capitals. Grade C and D districts are faced with several challenges among which the lack of clear boundaries, creating issues of overlapping jurisdictions within and at state borders, as well as insecurities in many parts of the country that have stifled the functionality of many districts. For example, part of Galkacyo district is claimed by both Puntland and Jubaland states.

District councils are vested with the authority to formulate and implement policies and programmes within their jurisdiction. The number and composition of district councils differs from state to state. The number of councillors is based on the district grade, whereby grade A districts have more councillors than the rest of the districts (e.g., in Puntland, grade A district have 27 councillors while grade C districts have 17). Overall, many of the districts in Somalia do not have councils. There are 4 in South West state, 2 in Galmudug and Hirshabelle, 20 in Somaliland and 18 in Puntland. Even where councils exist, they rarely convene and do not effectively manage service delivery within their territory. Puntland and Somaliland are the only states where districts have been established and are providing a range of services. In essence, local governments are left to hold deconcentrated functions more than decentralised responsibilities. The UN Joint Programme for Local Governance (JPLG) has been in place since 2008 to support local government institutions in some states.

The councils are headed by a mayor and a vice mayor that are elected by the council’s members themselves at their first meeting. In Somaliland, council members are elected through universal coverage while in Puntland and in the other four new federal member states, councillors are elected by clan leaders. The mayor is chief executive of the district and is in charge of maintaining a link between the district council and the regional authorities. At the technical level, the districts are headed by an executive secretary who is appointed by the State Ministry of Interior. This executive secretary is a staff of the central government but reports to the district’s mayor.

Despite the adoption of local government laws in the various FMS, local governance and administration practices are not uniform either between or within states. The paragraphs that follow are restrained to the analysis of Puntland and Somaliland. The Constitution of the autonomous state of Somaliland and the Regions and District Law 23/2002 provide a mandate and legal basis for a local governance system. The state is divided into 94 districts as of September 2019. The laws provide for the separation of powers between the local executive and the council members who are elected through universal adult suffrage. Direct elections for councillors were held in Somaliland starting in 2002. The previous term of the district council members that were elected in 2012 (and should have lasted five years) had long expired before they were renewed in May 2021.

Chapter 6 of the Puntland Constitution and the corresponding Law No. 7/2003 provides for the decentralised system of government. Article 120 of the Constitution specifies that Puntland State will be divided into regions and districts and that the government is responsible for the restructuring and demarcation of their boundaries. The Constitution and the decentralisation law do not specify the number of the districts, which amount to 49 as of September 2019. Article 123 (2) provides that the districts shall have economic and administrative autonomy and shall be administered by the district councils. The Puntland Constitution provides for universal suffrage for district council members but, in practice, for the last 50 years, clan elders have elected councillors through indirect suffrage. In October 2021, the transitional Puntland electoral commission (TPEC) organised elections based on universal suffrage for local councillors in three districts. The TPEC plans to roll-out this electoral process to the rest of the state’s districts in 2022. In Puntland, decision-making at the district level is mainly done by the mayor, elected among the councillors, by the executive secretary, appointed by the Ministry of Interior and by the line ministries that oversee service delivery within the sectors.

The PC does not specify the distribution of functions and responsibilities to the state and local levels, instead, they are assigned through the various state laws. At the district level, the provision of most social services (education and health among others) is centralised and provided by the state government through its regional offices and the executive secretary (appointed by state governments) is responsible for the overall coordination of departments.

In Somaliland, Article 11 (2) of Law 23/2002 assigns to every district the responsibility to provide social and economic services, such as healthcare, education up to elementary/intermediate school level, livestock husbandry, internal security, water, electricity, communication and more, in so far as they are able to do so. The Somaliland decentralisation policy of 2013-2020 identified sectoral functions to be decentralised, including roads, education, health, water, electricity, internal security, communications, sanitation and hygiene and natural resources.

In Puntland, the services to be provided by local governments according to Law No. 7/2003 include general healthcare, establishment of markets, initiation and implementation of social development programmes, construction of elementary and primary schools, care and welfare of the environment, construction of water reservoirs, construction of mother and child health centres and renovation of road networks. The state decentralisation policy provides for devolution of five sectors that include roads, water, sanitation and hygiene, natural resources management, health and education.

In practice, local governments play a relatively minor role in many of the functions assigned to them by law or policy. In Puntland and Somaliland, only a number of operation and maintenance-related tasks have been devolved to the local government level, including routine maintenance, rehabilitations, provision of soap for handwash, hygienic storage of water, toilet maintenance, furniture repairs, black boards and chalks, payments of water and electricity bills, salaries for cleaners and security guards. Both states’ ministries are responsible for the management and delivery of the critical sector functions.

There are no current assignments of administrative functions to districts in the other four states, where the enabling policy and legal framework are not yet in place.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Regional level	Municipal level
1. General public services (administration)	Policy and regulatory framework; Recruitment of key staff (accounting officers of LGs)	Implementation of the State policy and regulatory framework
2. Public order and safety	Ensuring security of the state; Payment of salaries for security agency personnel	Ensure local security
3. Economic affairs / transports		Construction and maintenance of roads
4. Environment protection
5. Housing and community amenities	Development, maintenance and management of roads; Management of water service provision	Preparation, approval and implementation of the district spatial development plan; Construction of roads, gardens, markets, slaughter houses etc.; Land management, sanitation, hygiene and solid waste management;
6. Health	Policy formulation, planning and implementation Coordinate and harmonise services that are being implemented in the regional and district offices Payment of health workers’ salaries
7. Culture & Recreation
8. Education	Policy formulation, planning and implementation; Development of the curriculum; Coordinate and harmonise services that are being implemented in the regional and district offices; Payment of teachers’ salaries	Routine maintenance and rehabilitation of schools; Provide soap for hand wash; Hygienic storage of water; Toilet maintenance and furniture repairs; Payment of water & electricity bills; Payment of salaries for cleaners and security guards
9. Social Welfare		Community mobilisation; Social awareness; Taking care of vulnerable members of the community

Scope of fiscal data: 5 federal member states only (all federal states excluding Somaliland). No data for local level.

State and Federal Ministries of Finance

Availability of fiscal data: Low

Quality/reliability of fiscal data: Low

GENERAL INTRODUCTION: Article 50 of the PC provides that the responsibility of raising revenues shall be given to the level of government where it is likely to be most effectively exercised, without mentioning which government level or entity is in charge of which revenue source. The different tiers of government collect revenues from several sources broadly categorised under trade taxes, non-tax revenues and taxes on goods and services. Public sector revenues in Somalia are dominated by customs duties and other import taxes because there is a narrow tax base due to the predominantly informal nature of businesses. The FGS collects and spends revenue in Mogadishu and the surrounding Benadir region while the FMS collect and retain all taxes within their jurisdiction. This has led to inequitable revenue distribution, where Somaliland alone collects more revenue than the FGS, while Puntland collects almost half of the revenue of the amount gathered by South West, Galmudug and Hirshabelle states put together, as they hardly collect any revenue.

Subnational, state and local government expenditure by economic classification
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total expenditure	-	4	-	-	0.3%	-	-	19.8%	-	-	100.0%	-
Inc. current expenditure	-	4	-	-	0.3%	-	-	20.5%	-	-	99.5%	-
Compensation of employees	-	3	-	-	0.2%	-	-	27.8%	-	-	65.6%	-
Intermediate consumption	-	1	-	-	0.1%	-	-	35.6%	-	-	29.8%	-
Social expenditure	-	0.02	-	-	0.0%	-	-	0.8%	-	-	0.5%	-
Subsidies and current transfers	-	0.1	-	-	0.0%	-	-	157.6%	-	-	3.5%	-
Financial charges	-	-	-	-	-	-	-	-	-	-	-	-
Others	-	-	-	-	-	-	-	-	-	-	-	-
Incl. capital expenditure	-	0.02	-	-	0.0%	-	-	2.7%	-	-	0.5%	-
Capital transfers	-	-	-	-	-	-	-	-	-	-	-	-
Direct investment (or GFCF)	-	0.02	-	-	0.0%	-	-	2.7%	-	-	0.5%	-

EXPENDITURE: Most of the expenditure at state level (for the five FMS represented) is made on recurrent expenses (99.5%), 2/3 of this amount (65.6%) is spent on staff expenditure, and 29.8% on intermediate consumption. State government expenditure figures do not consider all of the resources that are dedicated to staff compensation because many of the civil servants, especially teachers and health workers, are often paid directly by development partners such as the World Bank under the recurrent cost reform finance, or by schoolchildren’s parents through the payment of school fees or with contributions from NGOs. While states dedicate 2.0% of their resources to direct investment, there is no reported spending on capital transfers.

Districts run a cash budget, meaning that their expenditure is limited to the level of cash inflow and they spend the funds at source. This greatly affects the availability of expenditure data at district level and compromises the accuracy of data at state level.

DIRECT INVESTMENT: Generally, states do not spend much on infrastructure development. The available social infrastructure such as schools and health centres are mainly constructed by development partners and NGOs, with the support of remittances sent by the diaspora and contributions from the users (pupils’ guardians for example). Among the five states for which data are available, only Puntland state government spent resources in capital expenditure in 2020 – this is attributed to the availability of resources from the local development fund (LDF) provided under the UN JPLG.

ⓘ No detailed data available for this country

A 2017 and 2018 fiscal year assessment on seven districts in Puntland revealed that the proportion of expenditure dedicated to social services within the entire district budget was of 15.0%. The majority of this social spending was allocated to security (41.6%), 27.9% on sanitation while 16.9% were spent on roads. Only 3.1% were spent on health and 2.3% on education.

In Somaliland, the information from eight JPLG-supported districts in 2018 revealed that 43% of the district budget was dedicated to social services. Most of the expenditure was set for roads (59.6%), followed by education (9.2%) and health (7.0%). The higher proportion of spending on services compared to Puntland could partially be attributed to the lesser conflictive situation in Somaliland, where there has not been war for the last 25 years.

Subnational, state and local government revenue by category
2020	Dollars PPP / inhabitant			% GDP			% general government			% subnational, state and local government
-	SNG	State	Local	SNG	State	Local	SNG	State	Local	SNG	State	Local
Total revenue	-	4	-	-	0.3%	-	-	70.0%	-	-	100.0%	-
Tax revenue	-	1	-	-	0.1%	-	-	19.0%	-	-	27.1%	-
Grants and subsidies	-	3	-	-	0.2%	-	-	-	-	-	68.0%	-
Tariffs and fees	-	0.03	-	-	0.0%	-	-	-	-	-	0.6%	-
Income from assets	-	0.05	-	-	0.0%	-	-	-	-	-	1.1%	-
Other revenues	-	0.1	-	-	0.01%	-	-	-	-	-	3.1%	-

OVERALL DESCRIPTION: Each of the FMS operate in a quasi-autonomous way and decide which type of taxes to collect. All the states and local governments mainly rely on revenue generated within their jurisdiction. Excluding Somaliland, for which data was unavailable, taxes are the second source of revenue at state level, representing 27.1% of their total revenue in 2020, after grants and subsidies that account for 68.0% of state revenues. The main type of tax are customs levies collected in the districts that have ports. Hirshabelle and South West states, that do not have ports, each collected less than SOS 5.9 million (USD 10 000 or USD 651 PPP) of revenue in 2020.

The main challenge facing revenue collection in states and local governments is levying similar but un-harmonised tax rates by the different tiers of government. Some states collect revenues from charges for services, property, licenses, rent and market taxes, which should ideally be collected by districts. This problem is exacerbated by lack of clarity on assignment of the different revenue sources between the federal, state and municipal levels of government.

TAX REVENUE: Each state has its own laws on local government revenue collection. In Somaliland, the powers to set, charge and collect taxes are provided for under articles 85 and 86 of Law No. 23/2002 and Law No. 12/2000 (harmonisation of tax). In Puntland, local government revenue-raising powers are contained in article 43 of Law No. 7/2003. Taxes are the second source of revenue at state level (excluding Somaliland), representing 27.1% of their total revenue in 2020. Most of the taxes collected are customs that arise out of international trade (duties on importation and exportation of products).

Due to the absence of functional local government structures, taxes are not collected in many districts throughout all states. In Banaadir Regional Administration, revenues are collected in less than half of the districts because of insecurity and insurgent groups. In Galmudug, the state Ministry of Finance collects revenue on behalf of the districts since they have no staff available for such a task.

GRANTS AND SUBSIDIES: Donors from development partners such as the World Bank and the European Union account for 10% of the FGS budget. From the total federal budget, another 10% is distributed to support the FMS through intergovernmental fiscal transfers. The FGS provides four types of intergovernmental fiscal transfers to the states: (i) discretionary transfers from the FGS local funds; (ii) the recurrent cost and reform financing grant that contributes to teachers and health workers’ wages; (iii) the surge support, and (iv) transfers of the EU budget support funds. Due to the absence of a formal policy framework, there are no guidelines on the allocation formulas for the FGS transfers to states. Similarly, there are no standardised allocation formulas nor transparent and clear criteria for state transfers to local governments. These intergovernmental fiscal transfers tend to be negotiated on an ad hoc basis, resulting in a discretionary and inequitable allocation of resources. Furthermore, the disbursement of these resources is highly unreliable and unpredictable. At times, the states’ ministries of interior unilaterally change the allocation or divert funds to other emerging priorities.

The most reliable, predictable and substantial fiscal transfer in the country is the local development fund (LDF), a discretionary development grant provided by the UN Joint Programme for Local Governance (JPLG) to selected districts (including nine in Puntland, eight in Somaliland and one in Galmudug since 2020) to fund capital investment. The grant is allocated according to the following criteria: 30% distributed equally to all the beneficiary districts, 20% allocated based on the estimated population and 50% allocated based on the performance of the districts based on the results obtained in the annual local government performance assessment exercise. In 2020, the LDF contributed by SOS 1.2 million (about 7.5% of the total revenue of Puntland state). This grant reaches districts through the state government financial system after the development funds are transferred by the UN Capital Development Fund (UNCDF) to the Ministry of Finance.

Other grant allocations are determined in an ad hoc manner both at federal-state as well as state-local level.

OTHER REVENUE: Other important revenue sources collected by the respective local governments in their areas of jurisdiction include port fees, tuna licensing fees, khat fees, among others.

ⓘ No detailed data available for this country

FISCAL RULES: In December 2019, a Public Financial Management Act was passed by the FGS. However, the process of translating this Act into English is on-going and based on this background, the findings on fiscal rules cannot be presented.

DEBT: Local governments run cash budgets and some of them borrow money to manage their cash-flows, but these are usually short-term credit lines from suppliers and contractors rather than formal loans.

In Puntland, Law No. 7/2003 permits local governments to borrow from international and domestic lenders. However, this is not a common practice and loans are managed differently by each local government because of the lack of regulation. In some districts, these loans are approved by the executive committee and the permanent committee (both committees of the council) while in others, the executive secretary (technical staff) approves them.

In Somaliland, Article 91 of Law No. 23/2003 prohibits local councils from borrowing money unless it is to respond to emergency issues that were not budgeted for, such as natural disasters. In cases where local governments borrow, the money has to be repaid within a maximum of two years and approval of the executive committee should be sought if the funds are less than 10% of own source revenue. If the amount is between 10 and 20% of own source revenue, the approval must be obtained from the council. Districts are prohibited from borrowing an amount above 20% of their own source revenue.

TERRITORIAL MANAGEMENT OF THE CRISIS: At the outbreak of the pandemic, Somalia was subjected to a lockdown to contain the spread of the virus, and the economy was only re-opened in August 2020. Since 16 March 2020, a total of 48 statements directly related to COVID-19 were released, each state being in charge of issuing directives within their area of jurisdiction. Somalia’s economy contracted by an estimated 0.4% in 2020. This decline was however less severe than what was anticipated (it was estimated that the economy was to contract by 1.5%) because of increased official flows, fiscal measures put in place by government to aid business and increments in the remittances by an estimated 17.6% in 2020.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: The FGS and the FMS devised emergency measures to cope with the pandemic: among these, increasing the health sector budget both for the FGS and FMS. Donors supported the FGS and FMS to scale up health sector and livelihood financing, specifically through the design and launch of a cash transfer program “Baxnaano” in April 2020 led by the Ministry of Labour and Social Affairs. Through this program, 100 000 of the most vulnerable households were supported with cash transfers. Regarding the support for economic relief and recovery of micro, small and medium enterprises (MSMEs) by enhancing their liquidity and supporting de-risking to mitigate the effects of COVID-19, the Gargaara company limited, established in 2019, was injected with additional resources.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The COVID-19 crisis had severe fiscal impacts resulting from revenue shortfalls that mainly arose from the lockdown. During the lockdown, many local revenue sources were disrupted because of the reduction in business activities and closure of markets. Customs duties (main revenue source for the public sector) were affected because of reduction in imports and exports; livestock export was limited and trade taxes and remittances among others were affected. The Ministry of Finance reported in April 2020 an anticipated drop in revenue by 30% in the second quarter of 2020, mainly in customs duties and business activities, and a 5% shrink in the economy.

The economic crisis caused by the COVID-19 pandemic led to the tripling of donor support and an increase by more than USD 100 millions of financial support, compared to what was received in 2019. The FGS increased fiscal transfers to subnational governments from 0.9% of GDP in 2019 to 1.8% in 2020, making fiscal transfers to subnational governments the second largest expenditure of the FGS after the wage bill. To counter the effects of the pandemic, and thanks to the large increase in external grants, the FGS mobilised new revenue to finance social programmes and intergovernmental grants to the FMS and the Banaadir Regional Authority.

ECONOMIC AND SOCIAL STIMULUS PLANS: The World Bank economic update reports that by September 2021, Gargaara had three Somali financial institutions on board to participate in the USD 15 million MSME financing facility. It is further reported that Gargaara had disbursed USD 1.45 million to 76 beneficiaries, with another USD 850 000 expected to be disbursed in 2021. The Gargaara facility is a liquidity support (lending facility) that was established in 2019 as a capital expenditure institution to increase credit to MSMEs. The objective of the facility was to support economic relief and recovery of MSMEs by enhancing liquidity and supporting de-risking to mitigate the effects of COVID-19 pandemic.