Page 7 - Azerbaijan State University of Economics

Hashim Al-Ali: Towards a realistic medium term macroeconomic and fiscal framework and
outlook for the Somali national economy (2017- 2019)

§ Persistently continuous of imbalances in the public account. This is in addition has been
characterized with narrow fiscal space, and the annual budget setting is dominated by recurrent
expenditure which represented over 98 percent of total budgeted appropriation in 2015. These
imbalances have been accentuated when only less than half of these dominated recurrent
expenditures can be financed by domestic revenues, during 2015 financial year;

§ Domestic private sector is still fragile and its activities far from being strategically
development oriented. Hence, the private sector has no strategic role in the Somali economy and
its recovery and development so far, apart from quite few public-private partnership (PPP) in
telecommunications and Electricity;

§ Lack of banking and financial system and the banks are playing no effective role in
developing the financial market, encouraging investment and/or lending to productive activities
or to SME in the Somali economy;

§ The domination of the informal activities on the private sector in Somalia, together with
widespread shady, gray and smuggling activities. These are actual source for creating distortions
in the aggregated growth trajectories, and generating fluctuation in sectoral development policies
and their instrumental variables;

§ The traditional nature of the Somali labour market, which is highly unorganized neither
following the standard norms of a labour market as an important market that support the growth,
and development of other important economic market such as; products market and financial
market, which both again lacking the right structural setting and development in Somalia. That
said, the labour market in Somalia nothing but reflection of the security, political, economic and
social environment of Somalia at present. The market is not responsive at any rate to the
increasing Somali labour supply. This is quite an evidence when supply is exceeding demand by
far, and the rising of unemployment rate in the economy, particularly, among the young
population of the nation. This phenomenon is coupled with a very low growth rate of
productivity;

§ Lack of full institutional capacity and its capability to, properly and optimally, handle the
management requirement for better development and growth. This is in addition to the
apparently quite weak and slow steps in a structural framework of anti-corruption and better
transparency. Besides, the generally practiced value that encourage, protect and tolerate
corruption and related corrupters. These are main factors contributing to curtailing development
process, and depressing investment activity, particularly, foreign investment;

§ Inequitable and unbalanced income and benefits distribution amongst the population and
among the regions (sub-nationals) of the economy, according to these regions potentialities and
needs. This is beside the absence of well-structured decentralization of economic development
efforts and management. These, however, all attributed to the absence of economic stability and
growth in Somalia, for quite many years, and have created a legacy of disparities and
imbalances;

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