Today from Hiiraan Online:
Somalia needs help to settle debt, says top development official
Wednesday, May 08, 2013
International donors must act quickly to help Somalia settle foreign debt arrears and unblock further reconstruction aid if the Mogadishu government is to extend authority over the war torn state, the continent’s top development banker said.
Somalia has an overall external debt of about $2.2bn and arrears to the IMF and World Bank of $352m. It is one of only three highly indebted African countries – including Sudan and Zimbabwe – that have yet to secure a writedown under international initiatives that have cleared much of the continent’s debilitating historic debt.
It owes the African Development Bank $70m and cannot access fresh financing until it has paid off this and other arrears. It took three years for donors to help Liberia overcome a similar hurdle when it was emerging from years of conflict. Somalia, whose central government was recognised last month by the World Bank and IMF for the first time since the outbreak of civil war in 1991, cannot wait that long, Donald Kaberuka, president of the African Development Bank, has said.
“Engaging with fragile states is risky but these are risks we must accept to take and then manage and mitigate them,” Mr Kaberuka told the Financial Times at a London conference intended to secure and co-ordinate international support for the seven month-old Mogadishu government.
About 50 nations and organisations were represented at the Lancaster House conference, the first in a string this year at which the new Somali government hopes to capitalise on international goodwill.
Donors have been galvanised by the havoc wreaked on trade routes by Somali pirates, threats to regional stability from al-Qaeda linked militants and the promise represented by the recapture of major urban centres by African Union forces, backing the government against the Islamists.
Progress is still shaky, however. Al-Shabaab militants still control large swaths of rural southern Somalia and mount regular bomb attacks in the capital, while tensions simmer between the central government and provinces controlled by ex-warlords and private militias who oppose the notion of a dominant centre.
“We have to ensure that cleaning up the external debt arrears does not take as long as it did for Liberia. Our ability to act quickly on this will unblock funds from international financial institutions which will enable the government to start providing things that Somali’s needed yesterday such as power and roads,” Mr Kaberuka said.
Large amounts of donor funds have been embezzled in the past. But Abdusalam Omer, governor of the near cashless central bank, said that without direct financial backing the government would struggle to extend its authority. Of $199m delivered after a 2010 conference only $3.5m actually went directly to Somalia, he said.
“For this government to move ahead and build strong institutions it needs to be banked directly. Spoon-feeding through NGOs and multinational financial institutions is not going to build strong institutions,” he said.
Mohamud Hassan Suleiman, finance minister, said almost everything needs to be renewed from scratch including the currency, which has not been officially reprinted for more than 20 years.
A new public service financial programme was being put in place to ensure better accountability, he added, and internally generated revenues, mostly from the ports, are up 68 percent in the past five months – to $23m. But that is a sum that barely makes a dent in Somalia’s needs. “We need to rebuild a country that has been devastated by war and has not had a functioning government for more than 20 years. You can’t throw a figure on that,” he said.
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