Somaliland Preliminary Budget Analysis (FY 2004)

Somaliland Preliminary Budget Analysis (FY 2004)
Ali Gulaid (CPA), San Jose, CA

It is apparent that the President of the poorest country has a blank check; a blank check that he writes to the order of President D. R. Kahin. Ironic but it is true and there is more. The Finance Minister claimed balancing the budget as one of his accomplishments and demanded to be congratulated for that. Well, it isn’t balanced. But first, the Rayaale administration has presented the long-awaited budget for the FY2004/2005 and it didn’t take long for the critics to cry foul but what was most unusual in this uproar is that the most scathing criticism came, not from the opposition, but no one less than the Minister of commerce and industry, a highly respected minister, straight shooter and a man of integrity who has made a name for himself in the crusade against corruption. The fact that the Minister was fired on the spot for highlighting the inconsistencies and omissions to the tune of 16 million US dollars out of a budget of 22 million have stunned the people of the most impoverished country in the whole world. Like any other African State, corruption is systemic and pervasive but it was the magnitude and the government’s unapologetic attitude that prompted the public to protest and risk arrest in a country where such inalienable fundamental human rights of expression are banned.

Click to see larger version of this chart

Unlike the insider information provided by the former Minister of commerce and industry, this analysis is solely based on the figures the cabinet has approved. Still it is prudent to consult with the budget document if at all any one can find it. After a lot of effort, I had some success in obtaining the major portions of the document but the detail is still missing and as they say the devil is in the detail and that have somewhat limited my analysis to be less than comprehensive as I would have liked but I intend to update it as soon as the complete document becomes available. For the record, the partial pages I have received were hard-to-read scanned copies, much like smuggled documents, which caused my figures to be So.sh 20,016 off which I have adjusted downwards on the amount allocated for the Hay’ada NERAD to reconcile. Now you know why the appropriations for the Hay’ada are slightly off.

The budget would become final only when the parliament adopts but one could presume it as final since the chance that the parliament would recommend any changes is very small but before I delve into the analysis, a word or two should be said about the essence of budget. Simply the budget is a financial plan or a road map that articulates the goals and the objectives of a government or even a household for that matter. Scarcity necessitates prioritizing the needs. In most of jurisdictions, Local, State, Federal or other governmental organizations, the budget is mandatory and that makes it a legal document. The budget is an estimate based on assumptions and projected revenue, which may or mayn’t materialize depending on the economy and the reliability of the projection tools utilized and that uncertainty demands constant monitoring and re-evaluations. Therefore, there is always an element of uncertainty in any budget but it is more so in a budget that the preparation process lacks transparency and the public input and debate are foreign. Needless to say, its credibility depends largely on the reasonableness of the assumptions and the methods on which it is based. And the assumptions underlying this budget and its reasonableness and the methods used remain an enigma and hence can’t be vouched independently. For emphasis, I would like to repeat that the revenue of 22 million or so for 2004 is just an estimate. Hopefully, by next year this time, the government would advise exactly how much they have collected, which they haven’t done this year. While this analysis is geared on towards the appropriations and its propriety it would be incomplete without pointing out who is going to pay the 43% increase the Minister is anticipating. According to the budget, the import tax would be increased by over 40%; whether that would drive the businesses to Bossasso or not, I don’t know.

To start with, in order to compare, contrast and convert the figures, here is the dollar rate applied by the Ministry, So. Sh 6,300 and 6,584 for 2003 and 2004 respectively. Of course these rates are artificial rates the administration have fudged in order to downplay the inflation impact. The market rate was So. Sh 7,100 to a dollar at the time. At any rate, according to the fudged rates the government has applied inflation is less than 5% and the purchasing power of Somaliland shilling has decreased proportionally. For example, the salary of the President which hasn’t changed in absolute terms for the last two years have decreased from 515,529 to $493, 700 in real purchasing power

Now, the budget the cabinet has just approved is $22 million, about 43% more than last year (2003). Briefly, for a quick reference, here is who benefited and how much: overall, almost all ministries and agencies have benefited from the estimated increase of the revenue except the residence of the President (Qasriga) and the salary of the Vice-President, which remain the same and higher education, the handicap and others have been eliminated. The ministry of information has received the highest increase over 347%, the removal of mines agency and the parliament coordinating ministries have increased more than 200% but less than 300%; fisheries, public works, sports and family affairs have increased more than 100% but less than 200%, ten other ministries increased over 50% but less than 100%. The justice ministry, the lower courts, house of elders, education and religion have received the least increase, less than 10%.

For the same token, here are the ten ministries and other cost centers that have biggest allocation of funds in SL sh: National Army (48,624,420,451), Police (18,859,392,017), Presidency (10,140,685,000), Finance (7,856,841,640), prison guard (6,910,184,984), Education (6,804,554,200), health (4,573,462,219), interior (4,395,268,482), information (4,315,366,226), and Qasriga (3,250,524,000).

While some have increased exponentially and some increased a notch or two, higher education, Hargeysa and Amoud Universities and the teachers training center, have been eliminated. This budget no longer considers higher education pivotal for the development of the country while tourism and the ministry that coordinates the parliament are considered more important. Further, entertainment has received $84,959 while higher education has been AXED.

To say this budget is a disappointment is an understatement. Education, health, infrastructure, agriculture and farming, water, livestock husbandry, justice, developmental programs and projects aren’t a high priority. The budget heavily weighs on security (57%), political funds (10%) and propaganda dissemination (3%). These three cost centers amount to 70% of the appropriation bill. Out of the remaining 30%, eight percent (8%) goes to social services including education, health and sports and the balance of 22% is shared among the rest. In this budget developing tourism in Somaliland is more important than improving the unattended and understaffed Ministry of justice and the proof is that the budget of tourism is more than the combined budget of justice department and religion. Such priority would derail and prolong the development we hoped for. The chance that Somaliland would experience any appreciable tourism in the coming foreseeable future is nil.

Moreover, this budget is neither complete nor balanced. In his visit to UK, the President unequivocally announced to the SL Forum representatives that due to the financial problems the government is facing, the delegation has borrowed the expenses the delegation incurred as a result of the visit to Europe. As I have stated elsewhere, the trip would have cost over half a million dollars in my estimation. There are two problems with the President’s admission. First the administration doesn’t have the authority to incur public debt without the approval of the parliament and second the budget doesn’t include any debt repayment but more importantly if the government is borrowing, it is operating on deficit.

That shows it is incomplete. It is also unbalanced. In a balanced budget, the inflow should equal to the outflow. For the FY 2003 budget, there was an unpaid bills amounting to $284,104, which should have been carried forward and included in this current expenditure but that debt has suddenly disappeared. In this current year (FY 2004), there is an outstanding bills amounting to $394,803, which means the government is planning to spend beyond its means. In short, the inflow is less than the outflow and that puts the budget off balance contrary to what the Minister claimed. In another words, unpaid bills (biilasha taagan) normally belong to the prior year and the incoming FY2004 budget is only an estimate and it is hard to know how much the government would owe at the end of the year. If the government is estimating how much it would owe at the end of 2004, it means the anticipated revenue (dakhligue) can’t cover the anticipated expenditure (kharashka), which means there would be a deficit. Last year’s unpaid bills were $284,104 and not $394,803. It is confusing.

In addition, capital improvement and developmental projects and programs aren’t a priority. The only project that is planned is the expansion of the government Radio at a cost of over four hundred thousand dollars (US$432,000). That is outrageous. In a country where people are starving, draught is menacing, children are unschooled, HIV/Aids, tuberculosis and malaria are rampant, infrastructure is decaying or non-existent, expanding a radio that doesn’t contribute to the well-fare and the standard of living of the people and advance development denotes that the priority of this administration lies not in developing the country but developing propaganda.

Strangely, the government has publicized that it has earmarked funds for the two opposition parties, US$15,000 each, but that isn’t appropriated anywhere in the budget the government has submitted. Similarly, the Minister of Finance has repeatedly stated the government has appropriated considerable fund for the services of a reputable law and public relations office contracted to assist the government on the campaign and the quest for political recognition but the Minister has failed to name the reputable company or specify the amount. Again, that considerable amount isn’t appropriated in the budget unless it is part of $225,456, which is under the heading of overseas missions (Kharashka Danjirayaasha) but that is unlikely because this important fund has increased less than 2%. I might hastily add there is enough pork on the Madaxtooyada where that could be carved without any pain

According to the budget, the President is either volunteering his service or he pays himself as he pleases or he has an annual salary of $515,956 or more. The latter is closer to realty while the second can’t be ruled out. Neither the public nor the parliament, nor the cabinet knows the remunerations of the President and no one dares to ask. Rather than signing the dotted line like any one else, the President is rewarded with a blank check. That blank check is drawn on one of two accounts: the residence of the President (Qasriga Mataxtooyada) and the Presidency fund (Madaxtooyada). The qasriga Madaxtooyado has a budget of US$515,956 (SL sh 3,250,524,000) while the Madaxtooyada has an allocation of US$1, 609,629 an amount equivalent to over ten billion Somaliland shilling (10, 140, 665,000). The allocation for the Madaxtooyada has increased over 61% and is the third largest cost center, after national army and the police. Its budget is greater than the combined budget of nine ministries and agencies: The house of elders, the house of representatives, parliament coordinating ministry, foreign affairs, justice, religion, the high Court, commission for contracts, and the agency for removal of mines. It is important to stress that both cost centers are under the disposal and the discretion of the President and no one else. The government is unwilling to release the details but according to last year’s sub-headings, the President’s political fund was apportioned as follows: salaries & wages, benefits, housing and supervisory allowance $251,221; repairs & maintenance $2,857; operating expenses $21,927 and general operations $720,112. This clearly shows that the staff of the President including the bodyguard and other incidental expenses such as travel is covered from the Madaxtooyada.

Therefore, it is reasonable to assume that the cost center “Qasriga” is the remuneration of the President. By virtue of this analysis, the President of the poorest country in the world is the highest paid president in the whole world, developed and underdeveloped. Compare the salary of the President of Somaliland $515,956 with that of President Bush $400,000; with that of the President of South Africa $120,000; with that of the President of Eritrea $36,000. It is worth mentioning that President Bush has an expense account of $50,000 while the President of Somaliland has an expense account of $1,069,000. To say he is paid is mislabeling; he grabs it at will. Others may choose to call it whatever they want but until a transparent and verifiable amount approved by the right authority is submitted to the public as the salary of the President, I assume whatever allocated to the Qasriga is euphemism for the salary of the President.

Similarly, the budget is silent on the salary of the Vice-President. Again, a lump sum amount of US$188,730 has been allocated to the “M/weyne Ku-xigeeneka” and for the same token; I assume it is the salary of the Vice-President unless detail is provided.

The salary of the President is more than the combined budget of seven (7) ministries: family affairs, justice, religion, agriculture, minerals & water, telecommunications and resettlement and the salary of the Vice-President is more than the combined budget of three ministries: religion, resettlement and planning. It is also more than the combined budget of the livestock development and religion.

The salary of the President, the Vice-President and the budget for the ministry for the presidency (political fund) is little bit over ten percent (10%) of the budget of the country while the budget of the social services; education, health and youth & sports is only about eight percent (8%) of the budget. It is also more than seventy-seven percent (77%) of the police force of the country.

Even though assassinations of foreign expatriates have marred the security of the country, crime is very low by all measures. Yet the budget of the prison guards (ciidanka Asluubta) is the fifth largest budget $1,049,542. That of education is $1,033,499 and that of health is only $694,633. The budget of the prison guards is more than the combined budget of twelve (12) ministries: Justice, agriculture, minerals& water, Fisheries, Animal husbandry, Postal & telecommunications, Religion, tourism, youth & Sports, parliament coordination, Attorney general, and the development of nomads

The budget for the ministry of information is more than the combined budget of six ministries: justice, attorney general, the high court, the lower courts, civil servants agency and minerals & water ministry.

The Ministry of interior has a budget of $697, 662 and that is larger than the combined budget of ten Ministries and Agencies: Agriculture, telecommunications, religion, justice, family development, planning, resettlement, attorney general, parliament coordination and minerals & water. One should remember also that the prison guard (Ciidanka Aslubta) comes under the Minister of interior.

60% of the budget goes to unproductive and elements of destruction – security forces and its interrelated agencies. Destruction and not construction is the priority of this administration. One of the reasons all dictatorial administrations apportion the major portion of the resources is that it is beyond auditor’s jurisdiction. What is the number of Somaliland forces, what equipment do they have and can we verify? Top secret!

There are many others that are hard to believe and here are some: Garsoorka ciidamada ($12,697), kalmada/dhiri-gelinta ($188,556), qareenka saboolka ($6,683), magaha hawlgalka dawladda ($44,654) and many more. I have never heard the government has public defenders and why the national army needs a lawyer and who is he anyway and what kind of projects and programs does the grant for encouragement goes to?

For the sake of the uproar and the public outcry of the lack of water supply, it is opportune to inform the public that the budget for water and electricity of all government ministries and agencies is $144,279. But whether this amount would be credited to Hargeysa water agency account or not is another question. I will keep you posted next year.

For the record, wages & salaries, and allowances for housing, responsibilities and coastal hardships amount to $11,593,539.

Is there anything in this budget that met my expectation. Yes, the expansion for Hargeysa electric power of $255,162 is worth and long over-due. Wouldn’t it have been wise to reallocate the amount of $432,000 earmarked for the expansion of the Radio to expand Borama or Burcao electricity or water supply? It isn’t too late to demand so.
In addition to the misallocation, there is over 16 million dollars missing according to the allegations the former Minister of Commerce and Industry has expatiated in his press conference. And indeed the supplemental revenue accrued both in 2002 and 2003; the lease for TOTAL storage and the Berbera Port are off books.

Below are five figures – two charts and three spreadsheets – that could help you reach your won conclusion. Let the truth come out. Though I have tried to the best of my ability to submit to you the true figures as they appeared on the government document, I would urge you to verify it on your won. I am fallible and I might err. Good luck.

Click to see the chart

Figure III – Soo Kubida Guud Ee Miisaaniyada Sannada 2001 -2004

Figure – IV – Dhakhliga

Figure V – Kharashka – Line Items

Ali Gulaid, San Jose, CA

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