BUDGET OUTLOOK PAPER FOR FY2021
Ministry of Finance Development
MAY 15, 2020
Table of Contents
LIST OF TABLES ...... II LIST OF FIGURES ...... III EXECUTIVE SUMMARY ...... IV 1. INTRODUCTION ...... 1
1.1. OVERVIEW OF THE BUDGET PREPARATION PROCESS ...... 1 1.2. THE ROLE OF THE BUDGET POLICY COMMITTEE ...... 2 1.3. THE BUDGET CALENDAR ...... 2 2. PRE COVID-19 MACROECONOMIC OVERVIEW ...... 4
2.1. ECONOMIC PERFORMANCE ...... 4 2.1.1. GDP ...... 4 2.1.2. Inflation and Exchange Rate ...... 4 2.1.3. Trade and Investment ...... 5 2.1.4. Public Sector Employment ...... 6 2.2. FISCAL PERFORMANCE ...... 7 2.2.1. Revenue FY2019 ...... 8 2.2.2. Expenditure FY2019 ...... 10 3. GLOBAL IMPACT AND OUTLOOK OF THE COVID-19 AND LOCUST SWARM ...... 12 3.1. COVID-19 ...... 12 3.1.1. Major trading partners ...... 13 3.2. LOCUST SWARM ...... 15 4. IMPACT AND OUTLOOK OF THE COVID-19 IN SOMALILAND ...... 15
4.1. FISCAL POLICY RESPONSE ...... 16 4.2. ECONOMIC IMPACT AND OUTLOOK ...... 17 4.2.1. GDP ...... 17 4.2.2. Inflation ...... 18 4.2.3. Exchange Rate ...... 19 4.2.4. Trade and Travel ...... 20 4.2.5. Investment ...... 25 4.2.6. Rainfall ...... 26 4.3. FISCAL PERFORMANCE, JAN – MAR 2020 ...... 26 4.3.1. Q1 Revenue performance ...... 27 4.3.2. Q1 Expenditure ...... 28 4.4. REVISED 2020 REVENUE ...... 30 4.4.1. Potential sources of additional revenues ...... 33 5. BUDGET FRAMEWORK FOR 2021 ...... 33
5.1. NDP2 FRAMEWORK ...... 34 5.2. BUDGET POLICY OBJECTIVES ...... 34 6. APPENDICES ...... 36
APPENDIX 1: TARGET VS ACTUAL REVENUE COLLECTION BY REVENUE ITEM, 2019 ...... 36 APPENDIX 2: TOTAL REVENUE BY RESPONSIBLE AGENCY COMPARED TO FORECAST (SLSH), JAN – MARCH 2020 ...... 38 APPENDIX 3: INVESTMENT PRIORITIES AT NATIONAL, REGIONAL AND DISTRICT LEVELS ...... 38 APPENDIX 4: NUMBER OF BUSINESS LICENSES ISSUED BETWEEN JAN 2018 - DEC 2019 ...... 39
I List of Tables
Table 1: Real GDP, Consumer price growth and COVID-19 cases and deaths in major trading partner countries, 2019 - 2021 ...... IV Table 2: Forecasted 2020 revenue collections by major type, for both scenarios (billions SLSh) ...... VI Table 3: Annual Headline inflation and average exchange rate since 2012, base year=2012 ...... 5 Table 4: Total import value and duty in 2018 and 2019...... 6 Table 5: Public sector (civil servants) employment from 2012 to 2020 ...... 7 Table 6: Domestic revenue and expenditure in current and constant 2012 prices, SLSh (2012 to 2019) ...... 7 Table 7: Fiscal Summary for 2019 and 2018, SLSh ...... 8 Table 8: 2018 and 2019 revenue collection, top five performing items ...... 9 Table 9: Expenditure summary by Chapter, SLSh ...... 11 Table 10: COVID-19 cases and deaths in major trading partner countries as of June 3rd, 2020 ...... 14 Table 11: Real GDP and Consumer price growth in select regions of the World, 2019 - 2021 ...... 14 Table 12: Restrictions on spending lines in the 2020 National Budget ...... 16 Table 13: YoY and MoM inflation by major category, base year=2012...... 18 Table 14: Exchange rate and YoY percent change, SLShs per USD (Jan – April 2019 and 2020) ...... 20 Table 15: Livestock, Skins and Hides exported in the first quarter of 2019 and 2020 ...... 21 Table 16: Value and Duty of Somaliland’s imports in the first four months of 2019 and 2020, SLShs ...... 22 Table 17: Top 10 Import Products by Value in the first four months of 2020, SLSh ...... 22 Table 18: Top 10 Import Products in the first four months of 2020 by Duty, in SLSh ...... 23 Table 19: Number of Containers and Ships/Vessels that arrived at the Berbera Port in the first four months of 2019 and 2020 ...... 23 Table 20: Type and number of Ships/Vessels that arrived at the Berbera Port in the first four months of 2019 and 2020 ...... 24 Table 21: Number of Passengers Arrived and Departed by Air in the First Quarter of 2019 And 2020 ...... 25 Table 22: Number of business licenses issued in the first quarter of 2019 and 2020 ...... 25 Table 23: Fiscal Summary of the First Quarter for 2020, SLSh ...... 27 Table 24: Actual Revenue Collection vs Budget Forecast in SLSh, Jan-March 2020 ...... 27 Table 25: Government Spend by Chapter in Q1 of 2020, SLSh ...... 29 Table 26: Short- and medium-term scenarios for impact on government revenue collections ...... 31 Table 27: Forecasted 2020 revenue collections by major type, for both scenarios (billions SLSh) ...... 31
II List of Figures
Figure 1: Budget Calendar ...... 3 Figure 2: Headline inflation rate (annual) and average exchange rate, Jan 2018 - Dec 2019 ...... 5 Figure 3: Composition of Livestock export from 2005 to 2019 (left) and total in 2018 and 2019 (Right)...... 6 Figure 4: Number of Business licenses in 2018 and 2019 (left) and building permits issued in 2019 (right) ...... 6 Figure 5: Public sector (civil servants) employment from 2012 to 2020 ...... 7 Figure 6: Fiscal summary for 2019 and 2018, Billions SLSh ...... 8 Figure 7: Revenue collection in 2018 and 2019, by type (left) and Agency (Right) ...... 9 Figure 8: Composition of revenue in Somaliland by tax category, 2019 ...... 10 Figure 9: Spend chapter, 2018 and 2019 ...... 11 Figure 10: Actual spend in 2018 and 2019 by Chapter as % of total Annual spend ...... 11 Figure 11: YoY Inflation by major category, base year=2012 ...... 19 Figure 12: Somaliland Shilling exchange rate against the USD and Annual Headline inflation, Jan 2018 — April 2020 ...... 20 Figure 13: Livestock export in Somaliland ...... 21 Figure 14: Monthly Number of Containers and Ships/Vessels that arrived at the Berbera Port since 2018 ...... 24 Figure 15: Number of Passengers that Arrived and Departed by Air per month since 2019 ...... 25 Figure 16: Number of Business Licenses Issued per month since 2018 ...... 26 Figure 17: Rainfall level (mm) registered by Location in Somaliland in Q1 of 2020 ...... 26 Figure 18: Customs and IRD revenue composition by station and office, Jan-March 2020 ...... 28 Figure 19: Government Spend by Chapter in Q1 of 2020, SLSh ...... 29 Figure 20: Government spend by sector in Q1, (percentages represent the execution rate of each Sector) ...... 30 Figure 21: Forecasted 2020 government revenue collections and shortfall, in SLSH billions ...... 32 Figure 22: Monthly profile of forecasted revenues, in SLSh billions, incl. % shortfall against budget ...... 32
III Executive Summary
The Budget Outlook Paper serves to inform the Budget Policy Committee’s (BPC) discussions on key decisions for the 2021 budget. It provides a contextual framework upon which policies that reflect current economic and social developments are taken. This document introduces the role of the committee and the budget process. It provides an impact analysis of the COVID-19 pandemic on Somaliland’s economy and on the government’s budget. It subsequently provides an outlook for the economy and a revised forecast of revenue collection in 2020 before concluding with a framework for the 2021 budget.
The Paper (BOP) will assist the Committee (BPC) to: 1. Establish a ceiling for the central government spending for the 2021 budget 2. Agree on the size of the Contingency Reserve and on the operational guidelines of the reserve. In 2020, it was set at 0.24% of the National Budget (5 billion SLSh) and contributions were to increase to 1% in the subsequent 3 years. 3. Set the government’s expenditure policy with respect to the main expenditure heads: wages, recurrent and capital / development expenditure. 4. Advise on the direction of macroeconomic policy for the 2021 budget year 5. Outline the government’s expenditure priorities in line with National Development Plan II sectors.
Global economic outlook for 2020 looks gloomy: with the COVID-19 inflicting high and rising human costs worldwide (i.e. over 6.3 million cases and more than 380,000 deaths), containment measures enforced all over are significantly straining economies. This has led to supply chain disruptions, loss of income and unemployment, business closures, loss of government revenue and reallocation of expenditure away from most pre-COVID-19 development priorities. The IMF is projecting the world economy to contract by -3% in 2020—a contraction worse than during the 2008-09 financial crisis—before growing by 5.8% in 2021. Economies of Sub-Saharan African countries are projected to contract by -1.6% in 2020 before growing by 4.1% in 2021. Saudi Arabia, United Arab Emirates, Thailand and Malaysia—one of Somaliland’s major trading partners—are projected to contract significantly in 2020. The World Bank for its part estimates more severe effects of the COVID-19. Under a baseline scenario in which the impact of the virus are severe but contained, sub-Saharan African economies are projected to contract by -2.1% in 2020. While in a second scenario in which the outbreak is assumed to linger and spread more intensively, growth in the region is projected to decrease by -3.0%.
Table 1: Real GDP and Consumer price growth in select regions of the world, 2019 - 2021 Real GDP Growth (%) Difference Consumer Prices annual (%) 2019 2020 2021 from Oct 2019 estimates for 2020* 2019 2020 2021 Europe 1.6 -6.6 4.5 -8.4 3 2 2.4 UK 1.4 -6.5 4 -7.9 1.8 1.2 1.5 Sweden 1.2 -6.8 5.2 -8.3 1.7 0.5 1.5 Germany 0.6 -7.0 5.2 -8.2 1.3 0.3 1.2 North America 2 -6.0 4.5 -8 2 0.8 2.2 US 2.3 -5.9 4.7 -8 1.8 0.6 2.2 Canada 1.6 -6.2 4.2 -8 1.9 0.6 1.3 Asia 4.6 0.0 7.6 -5.1 2.7 2.5 2.5 Saudi Arabia 0.3 -2.3 2.9 -4.5 -1.2 0.9 2 United Arab Emirates 1.3 -3.5 3.3 -6 -1.9 -1 1.5 Thailand 2.4 -6.7 6.1 -9.7 0.7 -1.1 0.6 Malaysia 4.3 -1.7 9 -6.1 0.7 0.1 2.8 India 4.2 1.9 7.4 -5.1 4.5 3.3 3.6
IV China 6.1 1.2 9.2 -4.6 2.9 3 2.6 Sub-Saharan Africa 3.1 -1.6 4.1 -5.2 8.4 9.3 7.6 Kenya 5.6 1 6.1 -5 5.2 5.1 5 Djibouti 7.5 1 8.5 3.3 2.9 2.8 Ethiopia 9 3.2 4.3 -4 15.8 15.4 9.1 Source: IMF World Economic Outlook April 2020
The Government of Somaliland has been quick to implement social distancing measures and introduce fiscal policies to limit the spread of the virus and mitigate its impact. A partial lockdown was enforced in March which largely affected government institutions, schools, hotels, travel agencies, sport venues and transportation. The government has also banned the import of khat and closed Khat shops for a month during the Ramadan. While these measures are adversely impacting people and the economy, they are necessary to stop the spread of the virus and should be seen as an investment in the long-term human and economic health. The government has also introduced several fiscal policy measures to support those most affected (i.e. small businesses and the wider population). This includes: a reduction of import tax on main import goods (i.e. Rice, Sugar, Pasta and Flour), tax exemption for imports of medicines and medical equipment, a US$1 million contribution to a fund supporting poor families, US$1 million to support small businesses and a US$4 million contribution to help fund preventive measures to stop the spread of the COVID-19.
Somaliland’s economy is set to contract in 2020 due to the dual shock of the COVID-19 and locust swarm. While current data show that the effects of the COVID-19 have so far been moderate in Somaliland, this is likely to change very quickly in the next quarters as contractions in the rest of the world spill over into Somaliland. Income from the livestock sector, which contributes more than 40% to the GDP, is likely to fall in the event that this year’s Hajj is canceled. Furthermore, downward pressures on investment, consumption and government expenditure levels as a result of a fall in remittances and income from agriculture is likely to be greater than any current upsides. Moreover, average price levels (specifically Food prices) are picking up following a period of price stability in 2019. As a result, Somaliland’s economy is expected to contract in 2020 between -2 and -5% depending on which COVID-19 scenario pans out and commensurately with decreases from pre-COVID-19 growth forecasts in other countries.
Following a very good fiscal year in 2019, revenue collection in 2020 is set to significantly fall below target. While revenue collections have continued at pace and are consistent with 2019 collection patterns, the effects of the global pandemic are starting to materialize. The Ministry of Finance Development has updated its estimates for revenue collections in 2020 based on collections to date. Under a first scenario in which the effects of the COVID-19 are contained, revenue collection stands to be 12.5% below target in 2020 (-256 billion SLSh). Under scenario two in which the effects of the pandemic are significant, revenue is forecasted to be 20% below target (or -401 billion SLSh).
V Table 2: Forecasted 2020 Revenue Collections By Major Type, For Both Scenarios (Billions Slsh) 2020 Scenario 1 Scenario 2 Jan-Apr Tax/revenue types Budget Revised SLSh % Revised SLSh % collections target forecast variance variance forecast variance variance Income and profits 45 17 42 (4) -9% 40 (6) -13% Payroll & 93 31 88 (6) -6% 84 (9) -10% workforce Goods & services 604 199 545 (59) -10% 507 (97) -16% International trade 1,041 294 882 (159) -15% 792 (249) -24% Other taxes 87 27 75 (12) -14% 68 (19) -22% Other revenue 168 36 151 (17) -10% 147 (21) -13% Total w/o grants 2,039 604 1,783 (256) -12.6% 1,638 (401) -19.7% Grants* 3 1 3 - 0% 3 - 0% TOTAL REVENUE 2,042 605 1,786 (256) -12.5% 1,641 (401) -19.6%
VI 1. Introduction
The Ministry of Finance recognizes that an effective, efficient, inclusive and participatory budgetary process is a major factor in ensuring timely and cost-effective service delivery to the citizens. The following Budget Outlook paper (BoP) aims to facilitate that process by providing a contextual framework upon which policies that reflect current developments are taken. It is intended to assist the Budget policy Committee (BPC) in their decision making for the 2021 National Budget and resource allocations for the medium-term. The BoP is rendered even more important by the current COVID-19 pandemic, the locust invasion in East Africa and potential floods in the region. The social and economic implications of which are unique, multilayered and exacerbate one another and will require effective policies that not only target those most (likely to be) affected but also pave the way for a quick recovery in the medium-term.
The budget outlook paper is divided into four main sections. The first part gives a clear and concise overview of the budget process—as set out in the Public Financial Management Act, No.75/2016—and the role of the Budget policy committee. The second section provides a macroeconomic overview of Somaliland’s economy prior to the pandemic. The third section provides a short analysis of the global impact and economic outlook of the COVID-19 and the locust invasion in East Africa. The fourth section does the same for Somaliland, highlighting the government’s policy response and a macroeconomic outlook for the economy.
In the midst of the current COVID-19 pandemic, locus invasion and potential floods, the Ministry of Finance Development looks to the Budget Policy Committee to reach a consensus on government expenditure priorities—recurrent and capital expenditure—, the size of the contribution to the contingency fund, and on monetary policy framework for the 2021 fiscal year.
The aim of the paper is therefore to: Introduce the budgetary process; Provide a Pre COVID-19 Macro-Overview of Somaliland’s economy; Provide a Global Economic and Social Impact analysis of the COVID-19 and locust invasion; Analyze the Economic and Social Impact of the COVID-19 in Somaliland; Lay out the government’s policy response to the Pandemic; Provide a Macroeconomic and Fiscal Outlook for the economy.
1.1. Overview of the Budget Preparation Process
According to Article 55(4) of Somaliland’s Constitution, “the procedures for the preparation of the National Budget shall be determined by law”—namely by the Public Financial Management Act 75/2016 and the Financial and Accounting Procedures of the State. The following Budget preparation process has been set so as to be compliant with the PFMA Act.
The BPC selects the Government’s macroeconomic and fiscal policy & expenditure priorities; The MoFD estimates the amount of financial resources available to the government for the coming financial year in the Macroeconomic and Fiscal Framework (MFF);
1 The MoFD formulates the initial expenditure ceilings for each MDA in the Medium-Term Budget Framework (MTBF) and submits them to the Council of Ministers and House of Representatives; The MoFD communicates the coming year’s expenditure ceilings to the MDAs through a budget circular along with guidelines on how to submit their budgets; MDAs, with help from the MoFD’s Budget & Planning department, submit their budget to the MoFD using the budget submission template provided to them and through the IFMIS system; Budget negotiations take place between MoFD and MDAs after which the Budget is drafted; The Minister of Finance Development presents the National Budget to the House of Representatives after approval from the Budget Policy Committee/Council of Ministers; The House of Representatives debates, amends and approves the Budget set out by the Minister of Finance Development.
1.2. The Role of the Budget Policy Committee
The BPC’s role is to approve the government’s macroeconomic policy and expenditure priorities in the coming year and to approve all key Budget Documents (See Section 5) before they go to the Council of Ministers and House of Representatives. The MoFD will use the Budget Policy Committee’s decisions on fiscal policy and expenditure priorities to construct a set of initial expenditure ceilings for each MDA. These ceilings will be included in the Budget Framework which will then be presented—along with the Macroeconomic and Fiscal Framework—to the Council of Ministers and House of Representatives.
Budget Policy Committee’s Decisions on the 2021 Budget Expenditure Priorities Decision 1: Government Expenditure Priorities by NDP-II Sector Decision 2: Expenditure Policies on: a) Recurrent Expenditure b) Development/Capital Expenditure Decision 3: Total Government Expenditure Decision 4: Size of Contingency Reserve. The contribution in 2020 is 5 billion SLSh (or 0.24% of the National Budget) and was to be increased to 1% in the subsequent 3 years. Aside from the size of the Reserve, the BPC should set guidelines on the operational use of the Contingency Reserve.
Monetary Decisions Decision 5: Money Supply and Principles of Monetary Framework
1.3. The Budget Calendar According to the Public Financial Management Act No. 75/2016, figure 1 below presents the Calendar for Somaliland’s budget cycle.
2 Figure 1: Budget Calendar
•The MoF prepares the Budget Outlook Paper May 15th
Jun •The MoF prepares the Macroeconomic and Fiscal Framework (MFF) and MTEF 15th
•Government's Expenditure priorities are selected by the Budget Policy Committee in line with the NDPII & Jun Manifesto 20th
Jun •The MoF submits the MFF and MTEF to the cabinet and then to Parliament for approval 30th
•The MoF holds a public hearing Jul 15th
•The MoF consults the Economic and Trade Committee of the Parliament Jul 20th
•The MoF issues a circular to ministries, government agencies, autonomous agencies and local Jul 30th governments inviting them to submit their budgets
•Ministries and government agencies prepare and submit their budgets Aug
•The MoF holds negotiations with ministries and government agencies over their respective budgets Sep
•The MoF submits a consolidated budget to the cabinet which may amend it before approval Sep 25th •The MoF submits the budget approved by the cabinet to Parliament which may propose further Oct 1st amendments before approval
•The President signs the approved budget for execution Nov - Dec
•The Minister of Finance issues a circular notifying MDAs to implement the budget Jan 2021
•Ministries and Public Agencies execute the budget 2021
•Accountant General prepares and submits a consolidated financial statement of the government Jan - Apr
•Auditor General audits the Annual Budget following the end of the finacial year May - Jun
3 2. Pre COVID-19 Macroeconomic Overview
Prior to the COVID-19 pandemic and following years of intermittent growth, Somaliland’s Economy was trending upward. The Government’s policies had helped stabilize prices at their lowest level in two years and led to an appreciation of the Somaliland Shilling. Growth had resumed and trade volumes were increasing. The strengthening of the economy, along with government fiscal reforms, had led to an increase in the resource envelop and enabled the government to deliver much needed projects and services for Somaliland’s citizens. In 2020 and the medium-term, the government was expecting further increases in the fiscal envelope and a significant increase in development spending—thanks in part to continued tax reforms (e.g. expansion of the tax base).
2.1. Economic Performance
2.1.1. GDP
GDP was forecasted to grow at a conservative rate of 2% per year in 2020. This was based on the available GDP data at the time1 and on the recovery of key economic sectors in 2019. The agricultural sector for example, which contributes more than 40% to the GDP, was expected to continue its recovery and contribute more to the growth in the medium-term (i.e. through higher livestock export and subsequent increase in income for consumption and investment). This recovery was based on the lifting of the livestock ban, on favorable rainfall, on government agricultural projects in Wajale, Xaaxi, Beer, Sool and Sanaag, and on the livestock re-stocking project2. Moreover, the government’s planned spending adhering to the NDPII was also expected to boost the overall performance of the economy in the medium-term.
2.1.2. Inflation and Exchange Rate
Inflation: In 2019, Somaliland recorded the lowest average prices since 2016. The annual headline inflation was 4.6%. This was lower than the 8% recorded in 2018 and significantly lower than the 18.4% in 2017. The annual Energy, Fuels and Utilities inflation (EFU) and the Food & Crops inflation followed a downward trend since January 2018. They were 22.3% and 32.7% in January 2018, while in December 2019, they were -6.7% and 6.6% respectively.
Exchange Rate: The currency appreciated against the USD in 2019 following significant depreciations in 2017 and 2018. Compared to 2018, the currency appreciated by 16.4% in 2019, from 10,271 SLSh/USD to 8,587 SLSh/USD. Furthermore, the Somaliland shilling was fairly stable between March and December 2019, remaining between 8,000 SLSh/USD and 8,500 SLSh/USD. The appreciation of the Somaliland shilling was mainly attributed to a resumption in livestock export and to the Bank of Somaliland’s stabilizing policies. The Bank’s actions include setting a minimum permissible USD denominated transaction on mobile payment services to US$100, and ensuring exchange rate dealers did not trade above the 2% official exchange rate.
1 The latest published GDP data was for 2017. 2 The government has been helping families who lost their livestock from droughts by endowing them with new livestock
4 Table 3: Annual Headline inflation and average exchange rate since 2012, base year=2012 Year CPI Index* % Exchange Rate % 2012 100 6,464 2013 108.43 8.4% 6,838 5.8% 2014 115.87 6.9% 7,129 4.3% 2015 131.63 13.6% 7,564 6.1% 2016 133.12 1.1% 7,556 -0.1% 2017 157.63 18.4% 9,328 23.5% 2018 170.17 8.0% 10,271 10.1% 2019 178.08 4.6% 8,587 -16.4% *the Headline inflations are for the year-ending December Source: Ministry of National Planning and Development and the Bank of Somaliland
Figure 2: Headline inflation rate (annual) and average exchange rate, Jan 2018 - Dec 2019
11,000 20.0% 18.0% 10,500 16.0% 10,000 14.0% 12.0% 9,500 10.0%
8.0% Inflation rate Inflation 1 USD SLSh USD 1 to 9,000 6.0% 8,500 4.0% 2.0%
8,000 0.0%
Jul-18 Jul-19
Jan-19 Jan-18
Jun-18 Jun-19
Oct-18 Oct-19
Apr-18 Apr-19
Feb-18 Sep-18 Feb-19 Sep-19
Dec-18 Dec-19
Aug-18 Aug-19
Nov-18 Nov-19
Mar-18 Mar-19
May-18 May-19
Exchange rate Headline Inflation
2.1.3. Trade and Investment
Livestock export: Somaliland exported 1,816,610 heads of livestock in 2019, representing a 30% increase from 2018. Sheep & Goats export accounted for 91% of the 2019 export and was a 29% increase in exports from 2018. Cattle export in the same period increased by 17% while camel export increased by a significant 6,183% from 509 in 2018 to 31,983 in 2019.
Import: The value of imports in 2019 was 3.4 trillion SLSh, representing a significant 25% increase from 2018. Duties collected was 1.4 trillion SLSh and was 20% higher compared to 2018. The increase in the value of imports and duties collected was mainly attributed to an increase in the import volume, to an increase in the exchange rate applied to some imports and to an update of the valuation book used at the customs stations. Moreover, the Ministry of Finance’s continued commitment to implement the tax reform programs have led to increased efficiency at custom stations.
5 Figure 3: Composition of Livestock export from 2005 to 2019 (left) and total in 2018 and 2019 (Right)
4,000,000 Total Livestock export in 2018 and 2019 3,500,000 1,000,000 3,000,000 2,500,000 800,000 2019 2,000,000 2018 600,000 1,500,000 1,000,000 400,000 500,000
- 200,000
2007 2008 2006 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2005 - Jul
Sheep/Goat Cattle Camel Jan
Jun
Oct
Feb Apr
Sep
Dec
Aug
Nov Mar May
Table 4: Total import value and duty in 2018 and 2019 Import value (Current Prices) Duty (Current Prices) 2018 2,743,476,707,374 1,202,120,402,242 2019 3,436,083,817,459 1,448,061,017,132 YoY (%) 25.2% 20.5%
Investment and Construction: The Number of business licenses3 issued in 2019 was 1,627, representing a 41% increase compared to 2018. This increase was attributed to the resumption in growth of the economy. During the same period, 3,216 building permits were issued—with 1,175 licenses issued in Hargeisa, 813 in Burco and 483 in Berbera, representing Somaliland’s main cities.
Figure 4: Number of Business licenses in 2018 and 2019 (left) and building permits issued in 2019 (right)
Business license Number of Building Permits 250 1,175 200 150 813 100 50 483 0 282 269 194
2018 2019 Hargeisa Burco Berbera Las’anod Borama Erigavo
2.1.4. Public Sector Employment The total number of civil servants has increased by 45% since 2014—from 14,312 to the current 20,805. This reflects the government’s increased service delivery and capacity. As of May 2020, a total of 1,967
3 See appendix 4
6 additional civil servants were recruited in 2020—representing a 10% increase from 2019. An additional 33 workers will likely be recruited before the end of the year as stipulated in the 2020 National Budget.
Figure 5: Public sector (civil servants) employment Table 5: Public sector (civil servants) from 2012 to 2020 employment from 2012 to 2020
Year Civil % Change Civil servants servants 2014 14,312 25,000 2015 15,355 7% 20,000 2016 15,487 1% 15,000 2017 15,655 1% 2018 17,240 10% 10,000 2019 18,838 9% 5,000 2020 20,805 10% 0 Source: MoNPD and MoFD for 2019 and 2020 2014 2015 2016 2017 2018 2019 2020
2.2. Fiscal Performance
The government’s actual domestic revenue and expenditure per year has significantly increased since 2014—in current prices. While this paints a very positive picture, adjusting for inflation shows an actual year-on-year decrease in both the revenue collected and the amount spent in 2017 and also in 2018 for expenditure. These decreases coincided with the livestock export ban from Saudi Arabia. Moreover, Somaliland experienced severe droughts between 2015 and 2017 which lead among other things to the death of a significant amount of livestock and lower revenue collections. In 2018 and 2019, revenue collection picked up—growing by 18.7% and 13.4% respectively—, while annual growth in expenditure only resumed in 2019, increasing by 11.8%. The resumption in the growth is mainly attributed to increased livestock export, growth of the economy, to a new government taking office in 2018 and working to enhance its fiscal capacity.
Table 6: Domestic revenue and expenditure in current and constant 2012 prices, SLSh (2012 to 2019)
Current Prices Inflation adjusted (2012 prices) Year Revenue % Expenditure % Revenue % Expenditure % 2014 920,638,751,864 - 900,126,181,367 - 794,544,534,275 - 776,841,444,176 - 2015 1,053,777,477,698 14.5% 1,072,936,812,985 19.2% 800,560,265,667 0.8% 815,115,712,972 4.9% 2016 1,100,731,990,848 4.5% 1,201,439,920,303 12.0% 826,871,988,317 3.3% 902,523,978,593 10.7% 2017 1,176,602,739,373 6.9% 1,382,043,877,708 15.0% 746,433,254,693 -9.7% 876,764,497,690 -2.9% 2018 1,507,360,976,320 28.1% 1,484,870,776,133 7.4% 885,797,130,117 18.7% 872,580,816,908 -0.5% 2019 1,788,647,491,490 18.7% 1,737,854,117,239 17.0% 1,004,406,722,535 13.4% 975,883,938,252 11.8%
In fiscal year 2019, the government collected 1.789 trillion SLSh against a target of 1.782 trillion SLSh, representing a 6.5 billion SLSh surplus (0.4%)—in current prices. On the other hand, expenditure from the general government fund, was 1.737 trillion SLSh against a target of 1.782 trillion SLSh, representing an underspend of 2.5% or 44.3 billion SLSh. Compared to 2018, domestic revenue collection and expenditure were respectively 18.7% and 17% higher in 2019. The fiscal balance at the end of the 2019 fiscal year was 50.8 billion SLSh. The surplus in the revenue collection in 2019 was mainly attributed to higher import taxes—from higher than expected import volumes—, to an increase in the exchange rate used on some
7 commodities, to an update of the customs valuation book and to more collections of sales tax. The underspend on the other hand mainly came from lower expenditure on wages and salaries, on use of goods and on asset purchases.
Table 7: Fiscal Summary for 2019 and 2018, SLSh Fiscal Year Annual Budget Actual Difference Diff4. (%) 2019 1,782,154,460,000 1,788,647,491,490 6,493,031,490 0.4% Domestic Revenue 2018 1,637,902,540,120 1,507,360,976,320 -130,541,563,800 -8.0% % YoY Change 8.8% 18.7%
2019 1,782,154,460,000 1,737,854,117,239 -44,300,342,761 -2.5% Expenditure 2018 1,637,902,540,121 1,484,871,776,133 -153,030,763,988 -9.3% % YoY Change 8.8% 17.0%
Fiscal Balance 2019 50,793,374,251 2018 22,489,200,187
Figure 6: Fiscal summary for 2019 and 2018, Billions SLSh
2018 2019 2,000
1,500 1,782 1,789 1,638 1,738 1,507 1,485 BILLIONS BILLIONS SLSH 1,000
500 22 51 0 Revised Budget Domestic Revenue Expenditure Fiscal Balance
2.2.1. Revenue FY2019
Revenue in 2019 was composed of 1.57 trillion SLSh of tax revenue and 218 billion SLSh of non-tax revenue, representing 88% and 12% of total collections respectively. Compared to 2018, non-tax revenue remained stable, growing at around 1%. The sizable increase in tax revenue collection demonstrates the Government of Somaliland’s continued efforts towards improving domestic revenue mobilization.
Revenue collection patterns in 2019 were similar to previous years—with the customs department collecting most revenues in the third quarter, while the fourth quarter saw the highest collection performance for IRD. In relation to meeting revenue targets, Customs collections were 13% above target, while IRD collections were 24% below target. Targets for IRD collections were set too high for specific taxes, notably for payroll tax collections. With respect to the collection locations, about 68% of customs collections came from Berbera, 18% came from Kalabaydh, while the remaining 14% was collected from 14 other custom stations. IRD’s collections on the other hand came from Hargeisa—accounting for 73% of total IRD collection—with tax on payroll of public service the highest contributing tax item. Early analysis suggests that improvements in actual payroll tax collections in 2019, which were 6.29 billion SLSh higher than in 2018, were driven by improved compliance from large taxpayers and continued government reforms to the payroll tax. Collections from these taxpayers were on average 50% higher throughout the year.
4Diff. (Difference) is the Actual minus the Annual Budget
8
The largest sources of revenue in 2019 were taxes on imports, taxes on goods & services and administration taxes, accounting for over 60% of total collections. Taxes on imports accounted for 41% (738 billion SLSh) of total revenue and was the highest performing item against its target (i.e. exceeding by 8% or 56 billion SLSh)5. This overperformance was likely the result of increases to the exchange rate on imports of key commodities in early 2019 and to higher than expected import volumes. The second largest component of revenue, the tax on goods and services, made up 15% (270 billion SLSh) of total revenue. While this tax is still largely charged on imports, it was extended to key services including electricity and telecommunications during 2019, and hence grew at a higher rate than imports. The composition of revenue was largely unchanged compared to previous years, with the exception of income from local governments—these grew by more than 70% compared to 2018. The other notable difference compared to previous years was revenues from DP World’s post investment, which remained low as expected.
Table 8: 2018 and 2019 revenue collection, top five performing items Difference Difference Code Description 2018 Collection 2019 Collection (SLSH) (%) 1150101 Taxes on imports 603,181,790,655 737,937,645,941 134,755,855,286 22% 1140301 Tax on goods & services 203,691,547,656 270,102,141,142 66,410,593,486 33% 1410502 Administration tax 71,648,235,933 94,203,563,784 22,555,327,851 31% 1150601 Port taxes 61,877,671,605 86,554,356,872 24,676,685,267 40% 1160201 2% tax in Eastern Regions 64,125,252,476 82,896,379,821 18,771,127,345 29%
Figure 7: Revenue collection in 2018 and 2019, by type (left) and Agency (Right)
2,000 2,000
1,500
1,500 18% SLSH SLSH Billions SLShBillions 1,000 20% 1,000 500 82% 500 80% 0 Tax revenues Non-tax Total revenues revenues - 2018 2019 2018 2019 Customs IRD
5 See appendix 1
9 Figure 8: Composition of revenue in Somaliland by tax category, 2019
Taxes on imports 16.7% Tax on goods and services 2.3% Administration tax 2.7% 41.1% Port taxes 3.1% 2% tax in Eastern Regions 4.4% Mortgage tax 4.6% Taxes on payroll of public service Income from local government supplement Livestock export levy 4.8% 15.0% Other 5.2%
2.2.2. Expenditure FY2019
Government expenditure in 2019 compared to 2018 significantly increased for each major spending line— with the exception of Loan repayment. Actual Spend figures for compensation of employees, Use of Goods & Service, and Assets increased the most in absolute terms—with 100.9 billion SLSh, 78.2 billion SLSh and 68.6 billion SLSh, respectively. In terms of performance against target, spending on each major spending line (except on subsidies) was closer to budgeted amounts.
In FY2019, 885 billion SLSh was spent on compensation of employees, representing 51% of total expenditure. This was still 25 billion SLSh below target. A breakdown of this category shows that 877 billion SLSh was spent on Wages and Salaries and 8 billion SLSh on Social Contributions. More than half of the government’s underspend in 2019 came from Wages and Salaries. This is due to the number of recruits across government falling significantly below the expected target. On the other hand, 557 billion SLSh was spent on the Use of Goods and Services. This was 11 billion SLSh below target but still represented 32% of the government’s total spend in 2019. Most of the underspend came from the Use of Goods and Use of Services with 7.4 billion SLSh and 3.1 billion SLSh, respectively.
The Government spent 6 billion SLSh on Subsidies, representing a 798 million SLSh underspend. Government subsidies come in the form of a Budget Subsidy and a Food price subsidy. The Budget subsidy is a contingency for any expenditure line that was not budgeted for while the food price subsidy is used to support the army in times of significant food price increases. The underspend in Subsidies can therefore be attributed to better budgeting and to Somaliland’s Tender Board ensuring stable food prices.
Expenditure on Grants was 116.5 billion SLSh (843 million SLSh below target). A breakdown of this category shows that: 29.6 billion SLSh was spent on Current grants, 296.9 million SLSh on Educational Allowance, 4.8 billion SLSh on Emergency Relief and Refugee Assistance and 81.8 billion SLSh on Other Current Grants and transfers.6 Expenditure on Assets amounted to 109.6 billion SLSh—representing a 6.1
6 Current Grants consists of the government’s contribution to the JPLG program and to the development of Eastern Regions. Other Current Grants and Transfers consists of supports to various associations and institutions (e.g. Orphan schools, SOLJA).
10 billion underspend (-5.3%). On the other hand, Loan Repayment on domestic debt was 62.7 billion SLSh, representing a 40.8 million SLSh underspend (-0.1).
Table 97: Expenditure summary by Chapter, SLSh 2018 2019 YoY Description Actual Spend Underspend (%) Actual Spend Underspend (%) Actual Compensation of employees 784,185,228,452 -5.2% 885,137,103,568 -2.8% 12.9% Wages and Salaries 774,962,070,333 -5.1% 877,020,598,450 -2.7% 13.2% Employer's Social Contributions 9,223,158,119 -15.8% 8,116,505,118 -8.1% -12.0% Use of goods and services 479,593,834,349 -10.2% 557,838,478,521 -2.0% 16.3% Cost of Using Service Tasks 308,499,277,687 -12.8% 120,723,338,119 -2.5% -60.9% Cost of Using Goods 152,172,644,098 -2.7% 410,483,195,160 -1.8% 169.7% Routine Maintenance 18,921,912,564 -20.5% 26,631,945,242 -3.1% 40.7% Subsidies 4,608,311,432 -4.2% 6,042,788,569 -11.7% 31.1% Grants 90,559,881,823 -8.3% 116,531,112,001 -0.7% 28.7% Assets 41,060,792,023 -50.8% 109,645,481,013 -5.3% 167.0% Loan Repayment 84,863,728,054 -5.3% 62,659,153,567 -0.1% -26.2% Total 1,484,871,776,133 -9.3% 1,737,854,117,239 -2.5% 17.0%
Figure 9: Spend chapter, 2018 and 2019
2018 2019 1,000 885 900 784 800 700 558 600 480 Billions SLSh Billions 500 400 300 200 117 110 91 85 63 100 41 5 6 0 Compensation of Use of goods and services Grant Assets Loan Repayment Subsidy employees Figure 10: Actual spend in 2018 and 2019 by Chapter as % of total Annual spend
Loan Loan Repayment 2018 Repayment 2019 5.7% Subsidy 3.6% Subsidy 0.3% 0.3% Assets Assets 2.8% Grant 6.3% Grant 6.1% 6.7%
Use of goods Compensation and services Compensation of employees 32.3% of employees Use of goods 50.9% 52.8% and services 32.1%
7 Underspend is the difference between the actual spend and the budget target.
11 3. Global impact and Outlook of the COVID-19 and Locust Swarm
Somaliland is very much connected to the rest of the world through increased economic and diplomatic dealings and with the diaspora dispersed all over the world. Economic contractions in the rest of the world, including in Somaliland’s trading partner countries, will therefore have severe impacts on the local economy (i.e. through reduced trade, remittances, Aid, etc.). Understanding the extent and direction of these shocks is important for Somaliland when it comes to selecting effective fiscal and monetary policies for the short and medium-term.
3.1. COVID-19
The COVID-19 pandemic8 is inflicting high and rising human costs worldwide. Protecting lives and allowing health care systems to cope have required the enforcement of quarantines, social distancing, country wide lockdowns and widespread business closures around the world. As of June 3rd, there have been 6.3 million confirmed cases in the world, with a reported 380,000 deaths. The containment measures enforced around the world are severely straining economies through supply chain disruptions, loss of income and unemployment, business closures, loss of government revenue and reallocation of expenditure away from most pre-COVID-19 development priorities. Economic activity in the Euro area, Japan and the US for example, was reported to have plummeted in March 2020. Moreover, the number of people reported to be unemployed in the US as of April 2020 was 20.5 million—a 14.7% unemployment rate. This was the highest number recorded in the US since the great depression9 and is likely to have affected the Somali diaspora. Another significant impact of the current pandemic is on oil prices which are expected to remain below US$45 a barrel through 2023—about 25% lower than the average price in 2019—reflecting weak global demand. While the fall in oil prices will have severe impacts on oil exporting countries, oil-importing countries stand to benefit.
Responses in developed countries if successful will help reduce the impact of the pandemic on developing countries which rely heavily on remittances and on Aid. According to the IMF’s April 2020 World Economic Outlook, the Global economy is projected to contract sharply by -3% in 2020—a contraction worse than during the financial crisis of 2008-09—before growing by 5.8% in 2021. Economies of Sub-Saharan African countries are projected to contract by -1.6% in 2020 before growing by 4.1% in 2021. The IMF is nevertheless pointing to huge uncertainty surrounding the resumption in global growth as this will depend, among other things, on the pathway of the pandemic, finding a vaccine, the efficacy of containment efforts, behavioral changes (e.g. shifts in spending patterns, use of public transportation), and volatility in commodity prices. The World Bank for its part has provided growth estimates based on two scenarios for sub-Saharan African countries which show a more severe impact of the COVID-19. Under a baseline scenario in which the impact of the virus are severe but soon contained, growth in the region is projected to decline by -2.1% in 2020. Under a second scenario in which the effects of the COVID-19 outbreak are assumed to linger and spread more intensively, growth is projected to decease by -3.0%.
8 Content for this section was sourced from the IMF’s April 2020 World Economic Outlook; and from the IMF Policy tracker available at https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#I 9 https://www.washingtonpost.com/business/2020/05/08/april-2020-jobs-report/
12 3.1.1. Major Trading Partners
Data as of May 13th, 2020
Saudi Arabia: The government has asked all countries to delay making preparations for this year’s Hajj. As of April 26, they started loosening some of their restrictions. The government’s fiscal policy response has included a US$18.7 billion package to support the private sector and the reallocation of funds from the national budget to increase the share allocated to the Ministry of Health. The IMF is forecasting the economy to contract by -2.3% in 2020 and then grow by 2.9% in 2021—compared to a 0.3% growth in 2019. Consumer prices on the other hand are projected to increase by 0.9% in 2020 and 2% in 2021, from the -1.2% recorded in 2019.
United Arab Emirates (UAE): The government started loosening their restrictions on April 24th. Like Saudi Arabia, the UAE is facing a dual shock to its economy—namely from the COVID-19 pandemic and the fall in oil prices. The government’s policy response has included a US$7.2 billion fiscal package to support the private sector, to reduce government fees, to accelerate infrastructure projects, provide water and electricity subsidies, provide rebates on commercial lease payments in the tourism and hospitality sectors. The IMF is forecasting the economy to contract by -3.5% in 2020—from a 1.3% growth recorded in 2019— before picking up in 2021 by 3.3%. Consumer prices on the other hand are projected to decrease by -1% in 2020 compared to -1.9% in 2019 before increasing by 1.5% in 2021.
Kenya: The government’s fiscal policy response has included a Ksh40 billion (about US$375 million) package to support the health sector and the private sector (i.e. by providing social protection and cash transfers and food relief). Moreover, tax measures have been adopted to reduce income tax for people earning less than US$225 per month, to reduce the corporate tax base from 30% to 25%, VAT rate from 16% to 14% and turnover tax rate on small businesses from 3% to 1%. The IMF is forecasting Kenya to grow by 1% in 2020—significantly slower than last year’s 5.6% growth—before picking up in 2021 by 6.1%. Consumer prices are projected to grow by 5.1% in 2020 and 5% in 2021, slightly slower than the 5.2% recorded in 2019.
Thailand: The government started loosening their restrictions on May 3rd. Fiscal policy response has included a THB1.5 trillion (approx. US$46.7 billion) package to support the health sector, assist workers (through approx. UD$150 monthly payments), provide low interest loans and tax relief to businesses, lower water and electricity and employers’ social security contributions. The IMF is forecasting Thailand to contract by -6.7% in 2020 from a 2.4% growth in 2019, before growing by 6.1% in 2021. Consumer prices are forecasted to fall by -1.1% in 2020, from a 0.7% increase in 2019, before increasing by 0.6% in 2021.
Malaysia: They started loosening their restrictions on May 4th. Fiscal policy response has included a RM31 billion (approx. US$7 billion) package to support health care spending, make cash transfers to businesses and low-income households, provide tax and social security relief, electricity discounts, etc. The IMF is forecasting the economy to contract by -1.7% in 2020 from 4.3% in 2019, before growing by 9% in 2021. Consumer prices are forecasted to increase by 0.1% and 2.8% in 2020 and 2021 respectively, from 0.7% 2019.
13
Djibouti: Policy response from the government has included an increase in health and emergency spending and support to affected households and firms. The IMF is forecasting the economy to grow by 1% in 2020 and 8.5% in 2021 from the 7.5% recorded in 2019. Consumer prices are projected to grow by 2.9% in 2020 and 2.8% in 2021, from the 3.3% recorded in 2019.
Ethiopia: According to the IMF, Ethiopia is highly exposed to economic shocks from the pandemic given the contribution of its airlines to exports. The Ethiopian Airline has already suspended 80 flight routes. Moreover, the prices of the country’s main export commodities (i.e. coffee and oil seeds) have decreased. The government’s fiscal policies have included tax relief for businesses and people and a US$154 million package to support the health care system. An additional package is currently under preparation to support those most affected by the pandemic. The IMF is projecting Ethiopia to grow by 3.2% in 2020 and 4.3% in 2021, significantly slower than the 9% in 2019. Price levels are projected to grow by 15.4% in 2020 and then by 9.1% in 2021, slower than the 15.8% recorded in 2019.
India: Gradual relaxation of their restrictions started on April 15th. The government put out a stimulus package amounting to 1.1% of the country’s GDP to support low-income households (e.g. with cash transfers, food and cooking gas), provide insurance coverage for health sector workers and for health infrastructure spending. The economy is projected to grow by 1.9% in 2020, and 7.4% in 2021, from a 4.2% growth in 2019. Consumer prices are forecasted to increase at a slower pace in 2020 and 2021 by 3.3% and 3.6% respectively, compared to the 4.5% recorded in 2019.
Table 10: COVID-19 cases and deaths in major trading partner countries as of June 3rd, 2020
COVID-19 Cases Deaths Saudi Arabia 89,000+ 500+ United Arab Emirates 35,000+ 200+ Kenya 2,000+ 70+ Thailand 3,000+ 50+ Malaysia 7,000+ 100+ Djibouti 3,000+ 20+ Ethiopia 1,000+ 10+ India 207,000+ 5,000+ Source: Johns Hopkins University COVID-19 dashboard
Table 11: Real GDP and Consumer price growth in select regions of the World, 2019 - 2021
Real GDP Growth (%) Difference Consumer Prices annual (%) 2019 2020 2021 from Oct 2019 estimates for 2020* 2019 2020 2021 Europe 1.6 -6.6 4.5 -8.4 3 2 2.4 UK 1.4 -6.5 4 -7.9 1.8 1.2 1.5 Sweden 1.2 -6.8 5.2 -8.3 1.7 0.5 1.5 Germany 0.6 -7.0 5.2 -8.2 1.3 0.3 1.2 North America 2 -6.0 4.5 -8 2 0.8 2.2 US 2.3 -5.9 4.7 -8 1.8 0.6 2.2 Canada 1.6 -6.2 4.2 -8 1.9 0.6 1.3 Asia 4.6 0.0 7.6 -5.1 2.7 2.5 2.5 Saudi Arabia 0.3 -2.3 2.9 -4.5 -1.2 0.9 2 United Arab Emirates 1.3 -3.5 3.3 -6 -1.9 -1 1.5
14 Thailand 2.4 -6.7 6.1 -9.7 0.7 -1.1 0.6 Malaysia 4.3 -1.7 9 -6.1 0.7 0.1 2.8 India 4.2 1.9 7.4 -5.1 4.5 3.3 3.6 China 6.1 1.2 9.2 -4.6 2.9 3 2.6 Sub-Saharan Africa 3.1 -1.6 4.1 -5.2 8.4 9.3 7.6 Kenya 5.6 1 6.1 -5 5.2 5.1 5 Djibouti 7.5 1 8.5 - 3.3 2.9 2.8 Ethiopia 9 3.2 4.3 -4 15.8 15.4 9.1 *Is equal to the 2020 GDP forecasts made in April 2020 minus the 2020 forecast made in October 2019 Source: IMF World Economic Outlook April 2020
3.2. Locust Swarm10
Somaliland and a few East African countries are currently experiencing a dual shock to their economies and to the livelihoods of their citizens. In the midst of the current COVID-19 pandemic, whereby most government responses are focused on mitigating the social and economic impacts of the virus, the locust invasion is somehow getting less traction. Nevertheless, the threat posed by the locust swarm can be devastating. Earlier this year, a wave of locust swarms tore through East Africa destroying agriculture produce. At their peak, the swarms were destroying/eating 1.8 million tons of vegetation a day. They were thought to have spread rapidly in January and February through East Africa, including in Kenya, Ethiopia, Somaliland and Somalia. A second wave is currently forming. According to the Food and Agriculture Organization (FAO), a new swarm of locust can be expected from mid-June onwards, coinciding with the start of the harvest. The FAO estimates that an average locust swarm can destroy crops sufficient to feed 2,500 people for a year.
The social and economic impacts of the COVID-19 described above are exacerbated by the threat of the locust swarms in East Africa. As a result of this, coordinated efforts between governments in affected countries, donors and international organizations, need to be intensified in order to avoid a disaster. Food supply is likely to significantly fall as a result of the COVID-19 restrictions and the destruction of local agricultural produce by the locusts, leading to higher food prices, reduced income for farmers and significant fall in economic activity in East Africa.
4. Impact and Outlook of the COVID-19 in Somaliland
The government of Somaliland has been proactive with its response to the COVID-19 by introducing several containment measures and reallocating funds to support the health sector. A partial lockdown was enforced in March which largely affected government institutions, schools, universities, hotels, travel agencies, sport events (privately owned stadiums) and transportation. The government has also recently banned the import of Khat and closed Khat shops for a month—coinciding with the Ramadan. While these measures are putting a significant strain on economic activities, they are necessary to stop the spread of the virus and should be seen as an investment in the long-term human and economic health. As of May 13th, the number of reported cases was 68 with 6 reported deaths.
10 Data in this section was sourced from the FAO: http://www.fao.org/ag/locusts/en/info/info/index.html; and from the BBC:https://www.bbc.co.uk/news/resources/idt-84994842-8967-4dfd-9490-10f805de9f68.
15 4.1. Fiscal Policy Response
The government has also introduced several fiscal policy measures to mitigate the strain on the economy—namely on small businesses and the general population. These measures include:
1. The reduction of Import tax on the flowing Items: a. Flour b. Rice c. Sugar d. Pasta 2. A US$1 million contribution to a fund that has been set-up to support poor families. 3. US$1 million to support small businesses 4. Setting-up and contributing an initial US$1.6 million to an account aimed at funding preventive measures to stop the spread of COVID-19. 5. Tax clearance for health equipment such as: a. Medical Isolation sets b. N95 Respirators c. Surgical Masks d. Surgical Gloves e. Temperature scan (Head) f. Temperature scan (Body) g. Sanitizers h. Oxygen ventilators 6. The Government has also asked large traders/merchants, landlords and Banks not to put pressure on their customers on debt repayment. They have also asked them to help encourage investment. 7. Moreover, the government is also closely monitoring market prices for food, medical equipment in order to respond quickly and effectively.
In addition to the above policy measures and in anticipation of lower revenue collection in 2020, the government has also decided to restrict a few expenditure lines in the National Budget—including spending on development projects. A few agencies are exempt from these restrictions including the Army Force, Lower Courts, National Disaster Preparedness and Food Reserve Authority and the Ministry of Agriculture and livestock. The spending restrictions are temporary and will be reviewed regularly in line with monthly revenue collection performance and developments with the COVID-19. Furthermore, the budget will be revised in July if the government is unsuccessful in securing budget support from international donors.
Table 12: Restrictions on spending lines in the 2020 National Budget No Description Restricted 1 Buildings 100% 2 Purchase of fixed Assets 100% 3 Developmental Projects 100% 4 Maintenance of Assets 100% 5 Expenditure of decoration offices 100%
16 6 Debt Payments 100% 7 Expenditure of laws reform 80% 8 Master plan expenditure 80% 9 Foreign travel allowances 80% 10 Training and examination allowances 70% 11 Research allowances 50% 12 Contingency expenditure (not for contingency fund) 50% 13 Maintenance of vehicles 50% 14 Search for recognition 50% 15 Invitation allowances 50% 16 Reward allowances 50% 17 Consumer price index expenditure 30% 18 Patrol, fuels and oils 30% 19 Stationary 30% 20 PFM- expenditure 30% 21 Local travel allowances 30% 22 Outstanding bills 30% 23 Security expenditure 20% Total restricted amount 393,852,774,829 SLSh
4.2. Economic Impact and Outlook 4.2.1. GDP Current data in Somaliland show that the effects of the COVID-19 have been moderate so far; revenue collections from core taxes and trade taxes have been fairly stable to date. While this is very good news, it might just be the case that the effects of the COVID-19 are yet to fully materialize in Somaliland. Due to limited macroeconomic data, a robust forecast of GDP cannot be made at this time. Nevertheless, an informed assessment can be made based on the sectors likely to be most affected in order to provide an outlook for the economy for the reminder of the year. Income from the Livestock sector, which contributes more than 40% to the GDP, is likely to fall in the event that this year’s Hajj is canceled. This could potentially lead to an increase in the trade deficit depending on how much imports change. Moreover, there are likely to be downward pressures on investment, consumption and government expenditure as a result of the pandemic and the threat posed by the locust swarm. Remittances, which Somaliland heavily rely on for consumption and investment, will most certainly fall this year due to the economic contractions and increased unemployment levels around the world (i.e. in the US, UK, and EU area). Recent data show that remittances are already down by 13% in the first quarter. Government expenditure is also likely to decrease this year due to lower revenue collections—the extent of which will depend on the volume of imports and exports. Moreover, the government of Somaliland’s containment measures are already reducing economic activity. For example, decisions to close schools have had an adverse impact on Small shop owners and street vendors (mainly women) who usually sell snacks and drinks to school children. This reduction in economic activity will be exacerbated by the potential fall in remittances—and if the hajj is canceled, also by the fall of income from livestock export.
17 While these contractions are based on worst-case scenarios, their extent will depend among other things, on how quickly a vaccine for the COVID-19 is developed and distributed, on how quickly restrictions enforced in Somaliland and in the rest of the world are lifted, on the extent to which consumer behavior changes and the extent by which production and supply chains are disrupted. In any case, Somaliland’s economy can be expected to contract in 2020 between -2% and -5%, depending on which pandemic scenario pans out and commensurately with deceases from pre-COVID-19 growth forecasts in other countries.
4.2.2. Inflation
Somaliland experienced increasing average price levels in the first four months of 2020. The annual headline inflation in January was 4.6%—unchanged from December 2019. It then increased to 5.3% in February, to 5.6% in March and to 6.3% in April. The average annual headline inflation for the first four months was 5.5%. This was higher than the 4.3% registered in the last four months of 2019 but lower than the 7.1% registered in the same period in 2019. On a monthly basis, the headline inflation rate in 2020 increased by 0.5% in January, 0.6% in February, 0.8% in March and then by 1.1% in April. The increase in the average price levels between January and April 2020 can mainly be attributed to the sharp increase in the Food & Crops inflation in March. The Food & Crops annual inflation rate increased to 16.7% in March from the 9.7% registered in February—representing a 7.3% month on month increase. As of April 2020, the annual Food & Crops inflation was 18.1%, its highest level since May 2018. The annual Energy, Fuels & Utilities (EFU) inflation rate was also trending upward in the first quarter of 2020—possibly as a result of the introduction of the GST on electricity in November 2019—but saw a sharp decrease in prices in April. This decrease might be a result of the fall in oil prices around the world.
The recent increases in the average price levels—especially the Food & Crops inflation—is mainly attributable to the COVID-19 pandemic, to the 2020 Ramadan and to the locust swarms which have been ravaging agricultural produce in East Africa since 2019. The COVID-19 pandemic has led among other things to supply disruptions and cost of doing business due to the widespread trade restrictions around the world11. In the remainder of the year, average prices can be expected to increase in Somaliland but at a much slower rate as a result of the reduction of duties on the main import products (i.e. sugar, rice, flour and Pasta). Moreover, the gradual loosing of restrictions around the world should also slow the increase in prices. On the other hand, the impact of the locust swarms on the average prices will be dependent on how fast the invasion is brought under control to allow a recovery of the agricultural sector in the affected east African countries.
Table 13: YoY and MoM Inflation By Major Category, Base Year=2012
Month Headline Inflation Core inflation Food & Crops Energy, Fuels and Utilities (EFU) YoY MoM YoY MoM YoY MoM YoY MoM Oct-19 4.0% 0.5% 4.3% 0.7% 10.9% 1.4% -7.1% -2.3% Nov-19 4.5% 0.6% 5.4% 1.3% 6.1% -4.7% -6.3% 0.0%
11 The number of Containers that arrived at the Berbera port in Q1 of 2020 decreased by 1.5% compared to the same period of 2019; and the number of Ships/Vessels that arrived decreased by 24%—with the Bulk Food Vessels decreasing by 26% from 50 in Q1 of 2019 to 37 in 2020. See section 3.3.
18 Dec-19 4.6% 0.6% 5.6% 0.3% 6.6% 2.2% -6.7% 0.9% Jan-20 4.6% 0.5% 5.0% 0.1% 7.4% 3.8% -3.2% 0.5% Feb-20 5.3% 0.6% 5.3% 0.5% 9.7% 1.5% -0.5% 0.1% Mar-20 5.6% 0.8% 5.0% 0.1% 16.7% 7.3% 0.1% 1.6% Apr-20 6.3% 1.1% 6.0% 1.0% 18.1% 1.6% -6.2% -6.0%
Figure 11: YoY Inflation by major category, base year=2012
YoY Inflation 20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0% Headline Inflation Core Inflation Food Crops Inflation Energy, Fuels and Utilities (EFU) Inflation
Source: Ministry of National Planning and Development (MoNPD)
4.2.3. Exchange Rate
In January 2020, the exchange rate for the Somaliland Shilling against the US dollar was 8,670 SLSh/USD. This was a 2.0% depreciation from the December 2019 level which stood at 8,500 SLSh per USD. On the other hand, the currency appreciated on a monthly basis by 1.4% in February and then by 0.9% in March and April 2020. The average exchange rate in the first four months of 2020 was 8,524 SLSh/USD compared to the 8,942 SLSh/USD average in the corresponding 2019 period—representing a 4.7% appreciation.
The increase in average prices between January and April 2020, an expected shock to the current account (i.e. due to a decrease in livestock export if the Hajj is canceled), and expected fall in remittances should put downward pressure on the value of the Somaliland Shilling for the reminder of the year. Nevertheless, the Somaliland shilling is unlikely to change much given the government’s efforts to stabilize the exchange rate between 8,000 and 8,500 SLSh per USD as stipulated in the 2019 Macroeconomic and Fiscal Framework.
19 Table 14: Exchange rate and YoY percent change, SLShs per USD (Jan – April 2019 and 2020)
2019 2020 YoY Months Exch MoM Exch MoM Jan 9,918 0.80% 8,670 2.00% -12.6% Feb 9,050 -8.80% 8,552 -1.40% -5.5% Mar 8,350 -7.70% 8,473 -0.90% 1.5% Apr 8,450 1.2% 8,400 -0.9% -0.6% average 8,942 8,524 -4.7% Source: Central of Bank of Somaliland
Figure 12: Somaliland Shilling exchange rate against the USD and Annual Headline inflation, Jan 2018 — April 2020
11,000 20.0%
18.0% 10,500 16.0%
14.0% 10,000 12.0%
9,500 10.0%
8.0% 9,000 6.0%
4.0% 8,500 2.0%
8,000 0.0%
Jul-18 Jul-19
Jan-18 Jan-19 Jan-20
Jun-18 Jun-19
Oct-18 Oct-19
Apr-18 Apr-19 Apr-20
Feb-18 Sep-18 Feb-19 Sep-19 Feb-20
Dec-18 Dec-19
Aug-18 Aug-19
Nov-18 Nov-19
Mar-18 Mar-19 Mar-20
May-18 May-19
Exchange Rate Headline Inflation
Source: Data from the Bank of Somaliland
4.2.4. Trade and Travel
Livestock export: Total Livestock export in the first quarter of 2020 was 200,231 heads compared to the 181,709-number recorded in the same period last year, representing a 10% increase. Sheep & Goats export accounted for 82.9% of the total livestock export in Q1 of 2020 compared to 69.2% in the corresponding period of 2019. There were 165,904 heads of Sheep & Goat exported in Q1 of 2020, representing a 32% increase from the same period last year. On the other hand, Camel and Cattle export in Q1 of 2020 was lower than in Q1 of 2019. Somaliland exported 1,844 heads of Camel and 32,483 heads of Cattle in Q1 of 2020, representing a 90% and 11% decrease from the numbers recorded in the same period of last year.
20 Total livestock export has been increasing since 2018. This is mainly attributed to a continued recovery of the livestock sector following the Saudi Arabia ban in 2017 and persistent drought. This recovery is a result of higher rainfall levels in 2019 compared to 2018—which provided plenty of grazing land and water for the livestock—, and a result of the government helping families re-stock in 2019 following the loss of their livestock. Somaliland’s export of livestock has had a distinctive trend since 2018 at least (see figure 13, right), with the third quarter (i.e. July and August) registering a recurring spike in exports due to demand for the Hajj and Eid Al-Adha. While the second quarter of 2020 is likely to follow a similar pattern, the very likely cancelation of this year’s Hajj by Saudi Arabia because of the COVID-19 means that livestock export in the third quarter and subsequently for the whole year is likely to be much less than in 2019.
Table 15: Livestock, Skins and Hides Exported in the First Quarter of 2019 and 2020 Units 2019 2020 YoY Change (%) Skins Pcs 182,000 239,000 31% Livestock Heads 181,709 200,231 10% Camels Heads 19,283 1,844 -90% Cattle Heads 36,627 32,483 -11% Sheep & Goats Heads 125,799 165,904 32% Source: MoFD’s Customs Department
Figure 13: Livestock export in Somaliland Total Livestock export in 2018 and 2019 *Livestock export in Q1 of 2019 and 2020 1,000,000 250,000 0.9% 10.6% 200,000 800,000 2019 16.2% 2018 150,000 20.2% 600,000 100,000 400,000 50,000 69.2% 82.9% 200,000 0 2019 2020
-
Jul
Jan
Jun
Oct
Feb Apr
Sheep & Goats Cattle Camels Sep
Dec
Aug
Nov Mar May *Percentages represent the share of each type of livestock in the total livestock exported Source: MoFD’s Customs Department
Imports12: The nominal value of Somaliland’s imports in Q1 of 2020 was 831.4 billion SLSh. This was 2.5% higher than the value recorded during the same period last year. The total import value significantly decreased in January 2020 by 20% from December 2019 and was 12.5% lower than the amount recorded a year earlier in January 2019. In February and March 2020, import values increased both on a monthly basis and compared to the same period last year. Import duties on the other hand increased by 6.7% in the first quarter of 2020 compared to the same period last year. The January 2020 duties were lower than
12 Imports are valued at set prices rather than real prices in Somaliland—meaning that prices are fixed in the Valuation Book with few changes each year. In addition, USD quoted prices in the valuation book are revalued to SLSh through an exchange rate set by the government.
21 the same period last year but were significantly higher in February and March 2020 compared to last year’s corresponding periods.
While current data indicate that Somaliland is still to fully suffer the impact of the COVID-19, one would expect imports to decrease in subsequent quarters as disruptions in the global supply chain (e.g. delayed deliveries) ripple in Somaliland—everything else constant. While this should be expected, the government’s reduction of import duties on several import products is likely to minimize the reduction in imports. Import values in April 2020 were 280.5 billion SLSh; this was 9.9% lower than the previous month and 5.4% lower than that of the same period of 2019. On the other hand, Duties on imports are most likely to decrease in the second quarter as a result of the one month ban on khat import and on the reduction of import taxes on Somaliland’s main import products (i.e. Sugar, Rice, Pasta and Flour)—the latter is likely to have a smaller impact. Duties collected in April 2020 amounted to 120.9 billion SLSh,— 3.6% lower than the amount collected in March. Table 17 & 18 show that ten of the products imported accounted for 56.4% of the country’s total import value between January and April 2020, while pretty much the same set of products also accounted for 57.9% of the total duties collected. Sugar and Khat accounted for 13.1% and 11.6% of the total import value, while they also accounted for 7.1% and 26.8% of total duties, respectively.
Table 16: Value and Duty of Somaliland’s imports in the first four months of 2019 and 2020, SLShs Month Imports Value 2019 SLSh Imports Value 2020 SLSh YoY Change Jan 282,596,307,584 247,240,297,790 -12.5% Feb 248,035,470,100 272,971,541,289 10.1% Mar 280,593,948,836 311,189,171,835 10.9% Total 1st Quarter 811,225,726,520 831,401,010,914 2.5% Apr 296,340,742,854 280,463,299,992 -5.4% Total (four months) 1,107,566,469,374 1,111,864,310,906 0.4%
Month Imports Duty 2019 S.L.SH Imports Duty 2020 S.L.SH YoY Change Jan 121,289,122,809 116,984,073,772 -3.5% Feb 99,609,552,260 123,396,454,209 23.9% Mar 121,967,326,146 125,469,657,239 2.9% Total Q1 342,866,001,215 365,850,185,220 6.70% Source: MoFD’s Customs Department
Table 17: Top 10 Import Products by Value in the First Four Months of 2020, Slsh Description Value Value as % of total import value Sugar 145,419,200,231 13.1% Kat 129,194,481,262 11.6% Cooking Oil 82,374,785,137 7.4% Pasta/Macaroni 60,243,574,030 5.4% Rice 49,500,638,920 4.5% Wheat Flour 42,400,950,731 3.8% Unstitched Cloths 30,823,796,061 2.8% Dates 30,358,479,480 2.7% Stitched Clothes 28,704,581,965 2.6% Gas Oil 27,684,792,750 2.5% Total 626,705,280,566 56.4% Source: MoFD’s Customs Department
22
Table 18: Top 10 Import Products in the First Four Months of 2020 By Duty, In Slsh Description Duties Duties as % of total import Duties Kat 130,474,037,041 26.8% Sugar 34,438,412,689 7.1% Cigarette 24,415,789,508 5.0% Cooking Oil 19,308,643,925 4.0% Pasta/Macaroni 16,686,948,136 3.4% Saloon Cars 13,203,349,742 2.7% Rice 11,720,219,552 2.4% Stitched Clothes 11,213,746,640 2.3% Unstitched Cloths 10,348,615,154 2.1% Wheat Flour 10,021,615,327 2.1% Total 281,831,377,716 57.9% Source: MoFD’s Customs Department
Number of Containers and Ships Arriving at the Berbera Port
Between January and April 2020, there were 126 Vessels/Ships that arrived at the Berbera Port compared to the 177 that were registered in the same period in 2019—representing a 28.8% decrease. As can be seen in table 20, this decrease was observed among the Bulk Food, Doon and WFP Ships/Vessels. As for the number of containers that arrived at the Berbera Port in the same period, 16,309 were recorded in 2020 compared to 15,141 in 2019, representing a 7.7% increase. While the number of containers did not decrease commensurately with the decrease in the number of Ships/Vessels, it’s likely because eleven more Container Ships/Vessels were recorded in the first four months of 2020 than in the same period of 2019.
The outlook for the number of Ships/Vessels and containers arriving at the Berbera Port in the next quarters will be dependent on two main factors. The first will be on the magnitude of the supply chain disruptions from the COVID-19 and locus invasion—which should lead to a decrease. The second will be on the elasticity of imports to the reduction in import taxes on Sugar, Rice, Pasta and Flour. Table 19: Number of Containers and Ships/Vessels that arrived at the Berbera Port in the first four months of 2019 and 2020 Months Containers Ships/Vessels 2019 2020 YoY Change 2019 2020 YoY Change January 3,876 3,270 -15.6% 43 36 -16.3% February 2,971 3,715 25.0% 49 33 -32.7% March 4,135 3,828 -7.4% 38 30 -21.1% April 4,159 5,496 32.1% 47 27 -42.6% Total 15,141 16,309 7.7% 177 126 -28.8% Source: MoFD’s Customs Department
23 Figure 14: Monthly Number of Containers and Ships/Vessels that arrived at the Berbera Port since 2018 6,000 70
5,000 60
50 4,000 40 3,000 30 2,000 20
1,000 10
0 0
Jul-18 Jul-19
Jan-18 Jan-19 Jan-20
Jun-18 Jun-19
Oct-19 Oct-18
Apr-18 Apr-19 Apr-20
Feb-18 Sep-18 Feb-19 Sep-19 Feb-20
Dec-18 Dec-19
Aug-18 Aug-19
Nov-18 Nov-19
Mar-19 Mar-18 Mar-20
May-18 May-19
Containers Ships/Vessels
Table 20: Type and number of Ships/Vessels that arrived at the Berbera Port in the first four months of 2019 and 2020
Vessel Type 2019 2020 % change BULK CARGO 6 8 33% BULK FOOD 60 44 -27% CONTAINERS 37 48 30% DOON 61 9 -85% FUEL 3 7 133% OTHERS 4 8 100% WFP 6 2 -67% Total 177 126 -29%
Number of Passengers Arriving by Air
In the first quarter of 2020, there were 20,440 passengers that arrived in Somaliland by air compared to the 22,146 registered during the same period in 2019—representing a 7.7% decrease. The number of departures on the other hand in Q1 of 2020 was 21,598 while in 2019 it was 25,141—representing a 14.1% decrease. These decreases can mainly be attributed to the various travel restrictions imposed by countries all over the world—starting in March in most countries. Figure 15 below shows the monthly arrival and departures per month since January 2019. As can be seen, there was a spike in the arrivals and departures during the 2019 summer, corresponding to the holiday season. The same spike (trend) is unlikely to occur in 2020 due to the travel restrictions put in place by countries around the world to flatten the curve and the subsequent negative shocks that the COVID-19 pandemic will have on many people’s incomes.
24 Table 21: Number of Passengers Arrived and Departed by Air in the First Quarter of 2019 And 2020 Arrivals Departures Months 2019 2020 YoY 2019 2020 YoY Jan 7,309 7,444 1.8% 8,162 9,106 11.6% Feb 7,025 6,964 -0.9% 7,930 7,826 -1.3% Mar 7,812 6,032 -22.8% 9,049 4,666 -48.4% Total 22,146 20,440 -7.7% 25,141 21,598 -14.1% Source: S/Land Immigration Department
Figure 15: Number of Passengers that Arrived and Departed by Air per month since 2019 20,000
15,000
10,000
5,000
0
Arrivals Departures
Source: Somaliland immigration Department
4.2.5. Investment
The number of business licenses issued in the first quarter of 2020 was 319 compared to the 504 issued during the same period in 2019—representing a 37% decrease. This was nevertheless 17% higher than the number issued in the first quarter of 2018. Figure 16 shows that the number of business licenses that were issued per month in 2019 were higher than those in 2018 throughout the year. While it might be a stretch to assume that the COVID-19 pandemic is the sole cause of the decrease in business licenses issued in Q1 of 2020, it is nevertheless safe to expect that investment in Somaliland is likely to decrease in the next quarters as a result of the COVID-19—resulting in lower number of business licenses issued in 2020 compared to 2019. This is likely to occur because remittances from the diaspora that is used to finance businesses in Somaliland will most likely significantly decrease as a result of the pandemic. This could also be exacerbated by a significant decrease in livestock export if this year’s Hajj is cancelled.
Table 22: Number of business licenses issued in the first quarter of 2019 and 2020 MONTHS 2019 2020 YOY CHANGE JAN 129 107 -17% FEB 183 103 -44% MAR 192 109 -43% TOTAL 504 319 -37% Source: Ministry of Trade, Industry, and Tourism
25 Figure 16: Number of Business Licenses Issued per month since 2018 250 200 150 100 50 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2018 2019 2020***
Source: Ministry of Trade, Industry, and Tourism ***only the first 3 months of 2020 are covered
4.2.6. Rainfall
In the midst of the COVID-19 pandemic and the uncertainty about the magnitude of its social and economic impact, it is good to news that Somaliland is registering enough rainfall to avoid a drought. Figure 17 shows the amount of rainfall registered in 26 locations. Aside from Zaylac, Badhan, Xudun and Baligubadle, all the locations registered enough rainfall in the first quarter of 2020 to allow them to meet the minimum 350mm annual rainfall level required to avoid a drought.
Figure 17: Rainfall level (mm) registered by Location in Somaliland in Q1 of 2020
120 102 95 100 84 80 71 65 67 54 53 60 48.5 47.5 43.5 36.5 36 35 42 40 24 25 24 31 20 14 18.5
Rainfall Rainfall (mm) 20 5 3.5 2 4
0
Baki
Dilla
Burco
Zaylac
Xudun
Sheikh
Luhaya
Dhahar
Gebiley
Yagoori
Badhan
Borama
Berbera
Salaxley
Garadag
Caynabo
Cerigabo
Hargeysa
Odweyne
Buhoodle
Qulujeed
Cadaadley
Lascanood
Xaaji Saalax
Baligubadle Ceel-Afweyn Location
Source: From the Ministry of Agricultural Development
4.3. Fiscal Performance, Jan – Mar 2020
In Q1 of 2020, the government’s domestic revenue collection was 464.1 billion SLSh against a target of 509.8 billion SLSh—representing a 45.6 billion SLSh deficit (-9%). Import and export tax (duties), Goods and services tax (GST), tax on property income and registration tax accounted for most of the deficit. Although collections to date are below the budget target, this is consistent with collection profiles for previous financial years. Collections in Q1 were overall 17% higher than that of the corresponding 2019 period. The Government’s expenditure on the other hand was 353.1 billion SLSh against a Q1 allocation
26 of 469.6 billion SLSh—representing a significant 116.5 billion SLSh underspend (-24.8%). This underperformance can be attributed to a slight delay in the March salary payments, and in settling some of the government’s use of goods and services accounts with retailers. Moreover, the government’s careful approach to spending on assets in Q1 and the freezing of all spend on development projects because of the COVID-19, significantly contributed to the overall deficit. At the time of writing this report, the government has paid off most of its outstanding bills for the first quarter of 2020. The fiscal balance at the end of Q1 was 111 billion.
For the remainder of the year, the government is anticipating further underspend on some spend categories—especially from the restricted spending lines listed in table 12 that amount to 393.85 billion SLSh—as a result of the anticipated fall in revenue collections. Table 23: Fiscal Summary of the First Quarter for 2020, SLSh VARIABLES Q1 TARGET Q1 ACTUAL DIFFERENCE DIFF. (%) DOMESTIC REVENUE 509,781,544,823 464,141,700,251 -45,639,844,572 -9.0% EXPENDITURE FROM THE GENERAL 469,622,183,763 353,141,477,286 -116,480,706,476 -24.8% GOVERNMENT FUND BALANCE 111,000,222,965
Source: MoFD’s Budget & Planning Department and IFMIS departments
4.3.1. Q1 Revenue performance
In the first quarter of 2020, Taxation revenue was 437 billion SLSh or 94 per cent of total revenue for the quarter. The other sources of general government revenue represent a relatively small component: 27.4 billion SLSh or 6 percent of total revenue. The Customs Department and IRD collected 96% of the total revenue to date—with the customs department alone accounting for the collection of 77% of total revenue in 2020. Customs’ collection underperformed its target by 40 billion SLSh or 10% below target. IRD on the other hand, was 5 billion SLSh above its forecast for January, February and March 2020 (a 6% surplus). In terms of regional performance, Customs collection in Berbera underperformed target by 29.8 billion SLSh (11% below target) while in kalabaydh, it was 8 billion SLSh or 12% above target. For IRD, collection from Hargeisa outperformed by 890 million SLSh or 2% above target. Table 24: Actual Revenue Collection vs Budget Forecast in SLSh, Jan-March 2020 Budget Forecast Budget Forecast Actual revenue DESCRIPTION Difference % (annual) (to date) collection (to date) Taxes 1,871,177,992,995 467,794,498,249 436,685,405,214 -31,109,093,035 -7% Income and profits 45,366,371,939 11,341,592,985 13,410,345,930 2,068,752,945 18% Payroll and workforce 93,307,587,842 23,326,896,960 24,529,776,732 1,202,879,772 5% Goods and Services 603,962,756,750 150,990,689,187 154,334,064,487 3,343,375,300 2% Sales tax 259,328,849,787 64,832,212,447 64,261,625,719 -570,586,728 -1% Excise 7,111,033,619 1,777,758,405 2,363,259,987 585,501,582 33% Registration taxes 51,565,277,435 12,891,319,359 10,413,434,564 -2,477,884,795 -19% Other taxes on G&S 285,957,595,908 71,489,398,977 77,295,744,217 5,806,345,240 8% International Trade 1,041,057,359,003 260,264,339,751 223,771,780,189 -36,492,559,562 -14% Taxes on imports 872,198,720,274 218,049,680,068 195,577,684,128 -22,471,995,940 -10% Taxes on exports 74,526,632,143 18,631,658,036 7,186,949,907 -11,444,708,129 -61% Port taxes 94,332,006,586 23,583,001,646 21,007,146,154 -2,575,855,492 -11% Other Taxes 87,483,917,461 21,870,979,365 20,639,437,876 -1,231,541,489 -6%
27 2% tax in Eastern Regions 86,712,472,911 21,678,118,228 20,524,704,612 -1,153,413,616 -5% Other 771,444,550 192,861,138 114,733,264 -78,127,874 -41% Other Revenue 167,948,186,298 41,987,046,574 27,456,295,037 -14,530,751,537 -35% Property Income 35,756,429,739 8,939,107,435 317,756,045 -8,621,351,390 -96% Sales of Goods and Services 73,310,708,219 18,327,677,055 14,629,534,844 -3,698,142,211 -20% Fines and Voluntary Transfers 7,748,463,592 1,937,115,898 2,960,746,926 1,023,631,028 53% Transfers not classified elsewhere 51,132,584,747 12,783,146,187 9,548,257,222 -3,234,888,965 -25% TOTAL 2,039,126,179,292 509,781,544,823 464,141,700,251 -45,639,844,572 -9% Figure 18: Customs and IRD revenue composition by station and office, Jan-March 2020
Customs revenue composition Inland Revenue composition 2.5% 5.8%
15.5% 4.4%
21.6% 4.8%
66.0% 70.8%
Bali-gubadle Berbera Borama Berbera Boorama Burco Kalabaydh Masalaha Wajaale Caynabo Ceerigaabo Gabiley Zaylac Hargeisa Laascaanood Saylac
4.3.2. Q1 Expenditure
Expenditure by Chapter: In the first quarter of 2020, the government spent 210.2 billion SLSh on compensation of employees and 100.8 billion SLSh on the Use of Goods and Services. Expenditure on the two accounted for 89% (60% and 29%, respectively) of total Q1 Spend; while their underperformance accounted for 64% (26% and 38%, respectively) of the total Q1 underspend. With respect to individual allocations, expenditure on Assets and Loans significantly underperformed, with 75.9% and 73.3% below allocation respectively. Total spending on the government’s development projects was 23.7 billion SLSh against an allocation of 31.3 billion SLSh—representing a 24.4% deficit. A few of projects met their spending target for the quarter such as: The Fuel Levy Income, National Service Program, development of eastern regions and the Dates Project. The underspend on the Governments projects is a result of the freezing of all spending on development projects in early March to free up funds for a response to the COVID-19 and in anticipation of low revenue collection.
28 Table 25: Government Spend by Chapter in Q1 of 2020, SLSh Description Budget Q1 Allocation Q1 Spend Underspend Q1 Spend as % of Budget Compensation of employees13 986,400,932,926 239,849,141,573 210,169,068,392 -29,680,073,181 21.3% Use of goods and services 579,658,312,994 145,381,209,595 100,759,796,625 -44,621,412,970 17.4% Government Projects 171,563,089,428 31,306,030,432 23,661,162,904 -7,644,867,528 13.8% Assets 160,347,455,888 15,011,927,642 3,612,995,196 -11,398,932,446 2.3% Loans 84,699,600,000 21,324,900,000 5,699,590,529 -15,625,309,471 6.7% Grants 53,632,390,800 13,960,347,550 8,337,248,063 -5,623,099,487 15.5% Subsidies 4,698,217,964 1,538,626,971 901,615,577 -637,011,394 19.2% Contingency Fund 5,000,000,000 1,250,000,000 0 -1,250,000,000 0.0% Total (General Government Fund) 2,046,000,000,000 469,622,183,763 353,141,477,286 -116,480,706,476 17.3%
Figure 19: Government Spend by Chapter in Q1 of 2020, SLSh
Total Budget Q1 Allocation Q1 Spend 986.4
579.7
239.8 210.2 145.4 171.6 160.3 100.8 31.3 84.7 15.0 21.3 53.6 14.0 1.5 55.6 15.1 23.7 3.6 5.7 8.3 4.7 0.9 2.7
Compensation Use of goods Government Assets Loans Grants Subsidies World Bank of employees and services Projects Projects
Expenditure by Sector: almost every sector recorded significantly underperformed against their respective allocations in Q1—with the Energy and Production Sectors recording the highest underspend with 61% and 54% respectively. The Ministry of Energy and Minerals and the Ministry of Livestock and Fishery Development were in turn the biggest contributors to the underspend of those two sectors. On the other hand, the Security Sector only recorded a 6.6% underspend with most of it coming from the National Forces. As mentioned earlier, most of the underspend in Q1 is a result of late payments for the March salaries, lower than expected recruitment levels across government and on all non-essential government staff working from home since March. The resulting outcome is low spending on compensation of employees and on Use of Goods and Services.
13 The recorded spend on Compensation of employees is under-reported at the end of first quarter. This is because monthly payments are usually made on the 25th of each month and might as a result be slightly delayed due to unforeseen circumstances (e.g. logistical delays, etc.).
29 Figure 20: Government spend by sector in Q1, (percentages represent the execution rate of each Sector)
Q1 Spend Deficit Execution rate (%) 93.4% 160 140 120 80.8% 100 61.1% 80 SLSH BILLIONS SLSH 60 56.6% 40 82.7% 67.0% 45.6% 41.8% 20 47.4% 51.0% 38.9% 0 -20
-40
Other
WASH
Health
Energy
Security
Economic
Education
Production
Governance Environment Infrastructure
4.4. Revised 2020 revenue
Government revenue collections have continued at pace, yet effects of the global pandemic are starting to materialize. Collections are 11% (SLSh 75 bn, approx. USD 8.8m) below the budget target as of end April. This performance is however still consistent with the pattern of collections in previous financial years, and net collections for the first third of the fiscal year are 10% (SLSh 54bn) higher than for the same period in 2019. Yet a range of revenue lines are seeing decreased collections in recent months in line with government measures and global effects. Effects on trade and price levels are also slowly starting to materialize.
The Ministry of Finance Development has updated its estimates for revenue collections for the current fiscal year, based on collections to date. Different revenue lines will be affected in different ways. Short- term effects (across May and June) are expected to be driven by the Government of Somaliland’s response measures to limit the COVID-19 outbreak and its effects, as well as the immediate effects of the global economic shock. Medium-term effects (across the July – December period) following two different scenarios: Scenario 1: effects are contained, with trade and consumption remaining relatively stable, including some exports of livestock, and international travel resuming;
Scenario 2: effects are more significant, with trade and consumption becoming more constrained, minimal livestock exports due to cancellation of the Hajj, and international travel restrictions remaining in place.
30 Table 26: Short- And Medium-Term Scenarios for Impact on Government Revenue Collections Assumed impact Short-term effects (May & Scenario 1: contained Scenario 2: significant June) medium-term effects medium-term effects Full -90% n/a n/a High - 50% - 30% - 50% Medium - 30% - 20% - 30% Low - 10% - 5% - 10%
Updated estimates indicate a possible revenue shortfall of up to 20% for 2020. This is based on Scenario 2, and equals collections of about SLSh 401 bn below the budget target across the financial year. Meanwhile, under the more optimistic Scenario 1, collections are expected to fall short of the budget target by 12.5% or SLSh 256 bn.
Table 27: Forecasted 2020 revenue collections by major type, for both scenarios (billions SLSh) 2020 Scenario 1 Scenario 2 Jan-Apr Tax/revenue types Budget Revised SLSh % Revised SLSh % collections target forecast variance variance forecast variance variance Income and profits 45 17 42 (4) -9% 40 (6) -13% Payroll & 93 31 88 (6) -6% 84 (9) -10% workforce Goods & services 604 199 545 (59) -10% 507 (97) -16% International trade 1,041 294 882 (159) -15% 792 (249) -24% Other taxes 87 27 75 (12) -14% 68 (19) -22% Other revenue 168 36 151 (17) -10% 147 (21) -13% Total w/o grants 2,039 604 1,783 (256) -12.6% 1,638 (401) -19.7% Grants* 3 1 3 - 0% 3 - 0% TOTAL REVENUE 2,042 605 1,786 (256) -12.5% 1,641 (401) -19.6% Source: MoFD *Performance of grant collections is a linear estimate—actual realization is likely lower
Much of the forecasts depend on how trade develops in the coming months, as over 50% of budgeted revenues are made up of taxes on international trade, and a range of other revenue lines depend on trade tax collections. Current estimates assume a significant negative impact on imports and exports, with effects ranging from 30-50% on relevant revenue lines: this is in large part due to current trade and travel restrictions introduced by Government. Current forecasts assume that these measures are not extended.
31 Figure 21: Forecasted 2020 government revenue collections and shortfall, in SLSH billions 2,100 500 450 1,800 400 1,500 350
SLShBillions 1,200 300 250 900 200 600 150 100 300 SLShbnrevenueshortfall 50 - - Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Avg shortfall (RHS) Budget Actuals Scenario 1 Scenario 2
The forecasted revenue profile estimates that government collections will reach their lowest level in the short term, at around SLSh 110 bn per month in May and June. The scenarios then diverge significantly, based on how exports and imports recover from July onwards. Five revenue lines jointly make up close to 80% of the revenue shortfall, including import taxes, taxes on goods and services, port taxes, livestock export levies, the 2% tax on Eastern regions. Other significantly affected revenue lines include the administration tax, and entry fees on foreigners at the airport.
Figure 22: Monthly profile of forecasted revenues, in SLSh billions, incl. % shortfall against budget 200 35% 180 30% 160 140 25%
SLShBillions 120 20% 100 80 15% 60 10% 40 5% 20 - 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Actuals Scenario 1 Scenario 2 S1 % shortfall S2 % shortfall
There is currently greater uncertainty of the performance of government revenue collections than in previous budget processes. Revenue performance up to end April suggests that current revenue collections are closer to the level reflected in Scenario 1. However, it will only become clear whether government revenue collections approach Scenario 2 from the July revenue data (to be received in August). Estimates will therefore need to be updated regularly, as more revenue collection and trade data becomes available. Further measures introduced by Government, or current measures extended, will also mean that scenarios will need to be adjusted.
32 Meanwhile, the Budget Policy Committee should maintain conservative assumptions for the fiscal space available to government for 2021. The budget process should from the outset depart from the basis that resources available to the Government of Somaliland in 2021 will be less than those for the 2020 fiscal year, given the range of complex shocks that the country will face up to the end of the year.
4.4.1. Potential sources of additional revenues
The scope for the Government of Somaliland to expand the tax base is limited. A very broad ranges of taxes is already being collected in Somaliland, both at national and local level: almost all major tax types included in the Revenue Act 2016 have been introduced and are being collected. The Ministry is also conscious that introducing further taxes, or adjusting rates, may increase the tax burden on vulnerable citizens and businesses, at a time when their incomes are expected to be under pressure from the effects of the COVID-19 pandemic. Further reforms may only raise moderate amounts of revenues in the immediate future, though may bring valuable administrative improvements.
A few targeted measures will be explored to raise collections in 2021, in a way that will not harm vulnerable citizens and businesses. These include: Increasing excise tax rates on specific imports (e.g. tobacco, luxury vehicles);
Aligning sales tax rates on electricity services with the legal rate (e.g. adjusting the current rate from 3 to 5%);
Reducing tax expenditures by reviewing exemptions in imports.
The greatest scope for revenue gains however lie with improvements in taxpayer compliance. Regular, predictable revenue collections will be critical for the Government of Somaliland to manage the effects of the COVID-19 pandemic and provide vital services to citizens and businesses. A larger and more secure base of monthly revenue collections can be achieved through targeted measures, including easier payment methods, enforcement of late filing and payment penalties, and better risk management.
5. Budget Framework for 2021
The PFMA Act specifies that a Macroeconomic and Fiscal Framework and a Medium-term Budget Framework are to be produced together with the Annual Budget. These are to be finalized and presented to the Council of Ministers by the 30th of June.
1. Macroeconomic and Fiscal Framework (MFF): Shows the total amount of financial resources available to the Government for the next three years. It also includes an outlook for key macroeconomic variables and a description of the Government's macroeconomic policies. 2. Medium Term Budget Framework (MTBF): – Gives an indication of how much expenditure each sector will receive in the coming three years. These expenditure estimates will reflect the Government’s expenditure priorities. Each MDA will have a set of expenditure ceilings for year 1 of the MTBF – these ceilings are the core of the Budget negotiations.
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Macroeconomic and Fiscal Framework (MFF)
Government’s Macroeconomic & Fiscal Policy and estimated Government financial resources for coming three years (PFMA Act How much expenditure can Sections 1.1, 1.2, 2.1, & 4.2) the Government afford?
Budget Framework (BF) Indicative expenditure estimate for each public body for coming year What priorities will the (PFMA Act Sections 1.1, 1.2, 3.3 & 6.1) Government fund?
HoR make Budget Budget Negotiations Recommendations take place
The Annual Budget (Finance Bill) Sets out legal expenditure limits for each public body for the coming Financial Year (Sections 7.1, 7.2 & 7.4).
5.1. NDP2 Framework
A range of Sustainable Development Action Areas were identified in 2019 that address the country's economic and social challenges. These areas cut across different NDP2 sectors. Successful programs and policy interventions in these Action Areas will help to increase economic growth & human development as well as reduce poverty.
1. These action areas are identified in the NDP2 and help the Budget Policy Committee to make the decisions on expenditure priorities.
2. For each Action Area, there is a scope for private investment to fund policy interventions in that area - external aid does not qualify as private sector funding in this context
3. Where action areas, or NDP2 sectors, can attract funding from the private sector to fund interventions, then mechanisms to encourage and leverage external funding should be put in place. Public-Private Partnership (PPPs) is one mechanism for leveraging external funding which is already utilized in Somaliland. This allows the government to channel increased public funds to Action Areas where private funding is likely to be limited (e.g. In health and education).
5.2. Budget policy objectives
There are several fiscal policy objectives, which need to be addressed through the budgets for the coming three years. These include: Encouraging employment, particularly of young people Promoting domestic food production Protecting local industries Improving balance of payments
34 Stabilizing prices and foreign exchange Ensuring security and justice Ensuring free and fair elections Improving access to basic social services – water, health & education Protecting the environment
In the midst of the current COVID-19 pandemic and locus invasion, fiscal policies for 2021 and the medium-term also need to account for: 1. The impact of the COVID-19 (i.e. continued support to effected businesses and individuals); 2. The Ministry of Health’s National COVID-19 Preparedness and response plan; 3. COVID-19 exit strategies and related expenses (i.e. purchase of PPE equipment for every health sector worker); 4. The impact of the locus invasion.
35 6. Appendices
Appendix 1: Target Vs Actual Revenue Collection by Revenue Item, 2019 2019 Actual 2019 Budget CODE DESCRIPTION Revenue Difference % Target Collection 111010 Tax on housing benefits 19,577,907,797 9,763,842,018 -9,814,065,779 -50% 5 111020 Tax on business income 10,937,253,416 12,495,293,614 1,558,040,199 14% 1 111020 Withholding Tax (corporations and 10,437,253,416 74,385,560 -10,362,867,856 -99% 3 other enterprises) 112010 Taxes on payroll of civilian workers 48,583,426,819 30,818,419,314 -17,765,007,505 -37% 1 112010 Taxes on payroll of public service 62,604,699,355 55,322,715,309 -7,281,984,046 -12% 2 114030 Tax on goods and services 253,000,000,000 270,216,350,373 17,216,350,373 7% 1 114080 Airport service charges 2,000,000,000 575,166,000 -1,424,834,000 -71% 5 114080 Advertisement income 3,500,000,000 127,341,737 -3,372,658,263 -96% 6 114080 Other income from Posts &Telecom. 6,870,326,918 1,959,630,000 -4,910,696,918 -71% 7 114080 Business licenses & permits 22,000,000,000 17,069,593,279 -4,930,406,721 -22% 8 114081 Agricultural licenses 103,396,027 280,612,085 177,216,058 171% 3 114081 Fisheries licences/fees 326,608,704 951,097,000 624,488,296 191% 4 114081 Mining licenses/permits 2,160,035,329 736,928,395 -1,423,106,934 -66% 5 114081 Property tax registration 13,000,000,000 13,953,141,925 953,141,925 7% 6 114081 Registration tax in ships and boats 1,779,819,313 1,431,851,990 -347,967,323 -20% 7 114081 Registration tax for contracts 37,920,103,700 33,773,175,971 -4,146,927,729 -11% 8 114081 Income permits for use of coastal 0 0 0 0% 9 waters 114082 1608 Livestock holding ground fees 10,329,468 176,459,825 166,130,357 0 % 114082 Ports royalty fees/income 26,809,876,146 29,654,608,313 2,844,732,167 11% 2 114090 Mortgage tax 63,407,559,146 79,816,687,973 16,409,128,827 26% 2 114090 Income from stamps 5,754,088,595 1,612,851,266 -4,141,237,329 -72% 3 114090 Road tax 8,142,630,235 5,543,328,775 -2,599,301,460 -32% 4 114090 Road Development tax 16,760,588,566 15,190,180,601 -1,570,407,965 -9% 5 114090 Fuel tax (levy) 25,649,996,437 20,227,129,196 -5,422,867,241 -21% 6 114090 Road tax / levy 1,196,404,919 841,562,313 -354,842,606 -30% 7 114091 Other tax arrears 1,000,000,000 598,991,213 -401,008,787 -40% 0 114091 Livestock export levy 50,000,000,000 40,844,645,505 -9,155,354,495 -18% 1 114091 Tax on transport licenses 1,034,159,300 523,546,677 -510,612,623 -49% 2 115010 Taxes on imports 681,902,544,363 737,937,645,941 56,035,101,578 8% 1 115020 Livestock Export taxes 13,212,306,415 16,218,137,820 3,005,831,405 23% 1
36 115020 Taxes on exports 1,921,161,164 1,099,030,348 -822,130,816 -43% 2 115060 Port taxes 62,810,016,595 86,554,356,872 23,744,340,277 38% 1 116010 Miscellaneous taxes 12,599,310,989 567,151,971 -12,032,159,018 -95% 1 116020 2% tax in Eastern Regions 63,886,624,689 82,896,379,821 19,009,755,132 30% 1 131010 Current grants from foreign 0 0 0 0% 1 governments 132010 Current grants from international 41,821,260,000 17,403,844,440 -24,417,415,560 -58% 1 institutions 133020 Income from local government 40,315,794,330 47,895,041,424 7,579,247,094 19% 1 supplement 141050 Administration tax 73,730,986,282 94,180,779,515 20,449,793,233 28% 2 141500 Income from rent-houses $ stores 189,013,054 463,671,213 274,658,159 145% 2 141500 Landing fees 5,712,108,480 3,763,902,000 -1,948,206,480 -34% 3 141500 - Berbera oil terminal rent 44,347,170,080 0 -44,347,170,080 4 100% 141500 - Airport parking 5,000,000,000 0 -5,000,000,000 6 100% 142010 Income from sales of national 0 857,525,014 857,525,014 0% 4 resources 142010 - Income from sale of real estate 10,000,000,000 1,800,000 -9,998,200,000 5 100% 142020 Court earnings 3,728,320,635 3,713,508,725 -14,811,910 0% 1 142020 Income from public Notaries 49,968,000 138,446,026 88,478,026 177% 2 142020 Passport sales fee 4,592,220,480 1,490,940,000 -3,101,280,480 -68% 6 142020 Entry fee at airport (foreigners) 21,635,687,424 22,474,742,819 839,055,395 4% 7 142020 Transit tax 6,984,642,413 5,198,363,820 -1,786,278,593 -26% 9 142021 Income from vehicles license plate No. 5,469,754,203 11,103,230,176 5,633,475,973 103% 0 142021 Driving licenses 5,157,232,907 3,553,571,645 -1,603,661,262 -31% 1 142021 Entrance/exit fee for national passport 0 56,096,797 56,096,797 0% 3 142021 Visas for foreign passports 3,738,002,901 4,516,164,000 778,161,099 21% 4 142021 Vehicle registration 6,437,056,185 5,882,672,852 -554,383,333 -9% 6 142021 Embarcation fees for foreigners 679,348,800 665,796,000 -13,552,800 -2% 7 142021 Navigation fee 3,437,853,120 3,015,591,600 -422,261,520 -12% 8 143010 Prison sentences buying 854,908,222 520,377,852 -334,530,370 -39% 1 143010 Penalties 9,195,964,666 7,812,442,763 -1,383,521,903 -15% 2 TOTAL 1,823,975,720,000 1,804,560,747,681 (19,414,972,319) -1%
37 Appendix 2: Total Revenue by Responsible Agency Compared To Forecast (Slsh), Jan – March 2020 Budget Forecast Budget Forecast (to Actual revenue CODE RESPONSIBLE AGENT Difference % (annual) date) collection (to date) IRD 338,963,620,313 84,740,905,078 89,696,221,672 4,955,316,594 6% Customs 1,592,122,934,832 398,030,733,708 358,027,454,024, -40,003,279,684 -10% Other agencies: 1140808 Ministry of Trade 17,710,930,466 4,427,732,617 4,774,585,413 346,852,796 8% Ministry of 1140807 Telecommunications 1,648,825,046 412,206,261 468,030,073 55,823,812 14% Ministry of Information 1140806 and Awareness 136,077,400 34,019,350 26,775,402 -7,243,948 -21% 1415002 Ministry of Public Works 280,263,760 70,065,940 75,382,578 5,316,638 8% Ministry of Energy and 1140815 Minerals 521,316,282 130,329,070 134,623,500 4,294,430 3% 1140813 Ministry of Agriculture 378,832,693 94,708,173 44,169,900 -50,538,273 -53% 1140814 Ministry of Fisheries 754,627,776 188,656,944 1,103,277,000 914,620,056 485% Ministry of Environment 1420104 and Livelihoods 476,165,979 119,041,495 70,089,087 -48,952,408 -41% 1415001 Berbera Port Authority 35,000,000,000 8,750,000,000 0 -8,750,000,000 -100% Income from sale of real 1420105 estate 0 0 181,383,300 181,383,300 0% Income from LG 1330201 supplement 51,132,584,747 12,783,146,187 9,548,257,222 -3,234,888,965 -25% 1320101 Grants 3,150,000,000 787,500,000 787,500,000 0 0% Total other agencies: 111,189,624,148 27,797,406,037 17,214,073,475 -10,583,332,562 -38% TOTAL 2,042,276,179,292 510,569,044,823 464,929,200,251 -45,639,844,572 -9%
Appendix 3: Investment Priorities at National, Regional and District Levels NDPII Sector Technical area Level Specific Investment project Governance Election National Parliamentary & Municipal Reforms National Public Finance National Civil service Identity National Address system Communication National Telecoms interconnection Justice District Courts Administration District District commission facilities Security Defence National Civil defence force Defence National Youth national service Defence National Cyber force Law and order District Police stations Mobility District Patrol vehicles Enforcement District Correction facilities Infrastructure Energy National Grid Roads National Network Water Regional Hafiir dams Education Youth National Fund Technology National Research and development Teachers National Teacher training centre Technical Regional Vocational school Recreation Regional Sports arena Information Regional Public library Health Prevention National Promotion Referral Regional Hospital Primary District Health Centre
38 Emergency District Ambulance Production Contingency National Food reserves Agriculture – technology National Research and extension Livestock National Laboratory for health certification Livestock National Marketing agency Fisheries National Cold chain Mining - minerals National Mapping Industry Regional Industrial Zones Industry Regional Technology parks Agriculture – mechanization Regional Equipment rental services Environment Land -law National Act Land – protection National Parks Land & rural development National Research center Land – enforcement National Protection police force (Ilaalo) Land – sustainability Regional Reserves
Appendix 4: Number of Business licenses issued between Jan 2018 - Dec 2019 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 2018 68 79 126 82 87 82 100 82 121 125 87 112 1151 2019 129 183 192 90 94 92 180 115 147 142 113 150 1627 YoY 90% 132% 52% 10% 8% 12% 80% 40% 21% 14% 30% 34% 41%
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