- Associated Press - Wednesday, March 7, 2012

NAIROBI, KENYA While tens of thousands of its citizens were dying from famine, the U.N.-backed Somali government spent only $1 million on social services despite having $58 million in revenue, according to a report by a former Somali government official.

The whistleblowing report shines a light on chaotic and secretive financial dealings and says the Somali government failed to explain how the $58 million it recorded receiving last year actually was spent.

Somali government officials disputed the report by Abdirazak Fartaag, the former head of the Public Finance Management Unit, a Somali government body charged with overseeing the country’s financial management.

“The government is very committed in terms of fighting corruption,” said government spokesman Abdirahman Omar Osman. “That report does not reflect the reality on the ground, and it lacks credibility and data.”

More than $2.6 million was budgeted for social services, according to the report.

Mr. Fartaag was fired around the time he wrote another report saying tens of millions of dollars were missing from government accounts. Improved accounting of the money that comes in and out of the government is vital to solving Somalia’s 21-year-old civil war, analysts say.

As long as warlords and corrupt officials are able to benefit from the chaos, they have little incentive to end it.

At a conference attended by world leaders in London last month, donors and Somali officials agreed to set up a joint board to manage Somalia’s finances.

The failure to keep track of Somalia’s cash has proved deadly. Politicians fight for control of the cash, but little of it reaches the needy.

A promise to end corruption was a key recruiting tool for the Islamist insurgency fighting the government.

The fighting was a key cause of last year’s famine, which killed 50,000 to 100,000 people, according to the British government.

A refusal by insurgents to allow many aid groups access to distribute food also is a major problem. The United Nations is appealing for $1.5 billion this year to aid Somalia.

Somalia needs a solid framework that improves transparency,” said Comfort Ero, the Africa program director for the International Crisis Group think tank. “[The government] hasn’t provided basic services.”

The report, while not publicly released, was presented to Somali legislators last month. It is based on banking records, the government budget and other financial documents.

Last year, the government raised about $58 million, including about $20 million in domestic revenue and an additional $3.7 million seized at the airport as part of a confiscated ransom for pirates.

The government also received at least $34 million in cash donations from mainly Arab nations, said Mr. Fartaag.

About $41 million was withdrawn in cash by individual politicians, militia leaders and other leading Somalis who gave no identification other than their names.

Most of the rest of the money was also taken in cash by individuals who provided the Central Bank of Somalia with their name and the ministry that employed them. An additional $1.2 million in cash went to hotels, phone companies and airlines in Mogadishu, according to the report.

During the whole year, only about $1 million was recorded as being spent on social services, the report said. It was unclear how the money was spent because it was part of the $41 million withdrawn in cash.

Some of the cash withdrawn is believed to have been spent on government salaries, but it is unclear how much. The government did not respond to requests for records.

During that time, Somali children were dying in the streets, and starving families were flowing into the ruined seaside capital in an effort to escape the drought and war consuming their villages.

In September, the United Nations said 100 children were dying every day. The government spent $165,000 on “disaster preparedness” during the famine, according to the report.

“Everything is done on a cash basis, and no one has to account for it,” said Mr. Fartaag. “Nothing is functioning, everything is a briefcase institution. … That’s why they can’t provide services like water, hospitals or schools.”

The British government wants to address Somalia’s tangled finances by establishing a board made up of Somalis and foreigners to oversee the failed state’s finances.

A Somali and a foreigner would have to sign off on each withdrawal. London is also encouraging nations that make payments to the Somali government to publish the figures.

“The findings of the Fartaag audit are unconfirmed, but the joint financial management board is intended to tackle exactly the types of corruption and mismanagement that it raises,” said Matt Baugh, Britain’s ambassador to Somalia.

“The [board] will also reduce any risk of corruption in the assistance provided to Somalia by international partners and improve the accountability and transparency of that aid.”

Better management could make a huge difference. Mr. Fartaag said the government could easily earn itself $179 million a year, mainly by collecting a 3 percent tax from telecommunication companies.

The government could also tax remittances from Somalis living abroad and tax sales of the narcotic leaf called qat. It could also raise money by properly collecting revenue from the main port in Mogadishu, the report said.

Despite the circumstances described in the report, Somalia’s government has made small improvements. Some civil servants were paid last year, although many did not receive their salaries in the past months.

Government revenues are up from 2010, and more foreign donations are being declared.

The government is also debating a bill to impose an unspecified tax on telecommunication companies with an estimated annual revenue at about $540 million.

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