Presented by:Abdirahman Shariff

Abdirizak Hassan

Aid effectiveness is dependent upon:◦ Ownership◦ Alignment◦ Harmonisation

We need manageable process in Somalia due to : ◦ High levels of aid dependency◦ Uncoordinated Multiple donors◦ Low level of capacity – systems, skilled staff, etc. ◦ Not enough own source of revenue – weak revenue collection◦ Urgent need to deliver results – high public expectation◦ Urgent need to rebuild trust – critical transparency

Use of government system – bring all aid expenditures on budget and in government system = best aid modality◦ It ensures ownership, alignment and harmonisation

Measure of success is to determine how much is used in the government system

There are eight measures to determine to what extent aid on budget

On plan Programme and project aid spending is integrated into spending agencies’ strategic planning and supporting documentation for policy intentions behind the budget

submission

On budget External financing including programme and project financing and its intended use are reported in the budget documentation

On Parliament External financing is included in the revenue and appropriations approved by Parliament

On Treasury External financing is disbursed into the main revenue funds of government and managed through government’s systems

On procurement Externally financed procurement follows government procurement procedures

On accounting External financing is recorded and accounted for in the government’s accounting system in line with government’s classification system

On Audit External financing is audited by the government’s auditing system

On report External financing is included in ex-post reports by the government

There have been innovative approaches in many countries There are three “star” examples

◦ Sierra Leone◦ Afghanistan◦ Liberia

But also a range of other individual innovations in challenging environments◦ Zimbabwe◦ Timor Leste

Afghanistan Trust Fund

Sierra Leone Budget

Support

Liberia Health Pooled Fund

Benefits included: ◦ a non-inflationary boost to public spending◦ higher spending in MDG-related areas◦ significant improvements in public financial management. ◦ provision of a robust donor coordination mechanism

But it was high-risk, high-benefit strategy:◦ Based on very close relationship between UK and Sierra Leone

government at political and security level◦ In general donors no longer willing to take such risks◦ But EU is leading the way with new Statebuilding Contract ◦ And DFID is considering whether it needs a similar

instrument.

Great success – originally designed to manage around $50m but ended up managing $ 5 billion

Reasons for success:◦ Enabled financing of recurrent expenditures including police

salaries which donors are normally reluctant to fund◦ All expenditures were audited on monthly basis – if audit on

any item failed then the government was not reimbursed for that item for that month – this ensured money was well spent and any problems were picked up quickly

◦ Government used the trust fund as a bank account◦ Limited earmarking (50% limit) so reflect government priorities◦ Flexible procurement

Large share of donor assistance is for humanitarian purposes

Uncoordinated aid expenditures- duplicative and inefficient.

Many and sometime contradictory instruments in existence (and new ones proposed)

Most aid flows outside the budget & Somali government institutions

Inadequate information of how donor funds are spent and what is their impact

No option to support recurrent costs of Government

Fund Name FGS Role

Somali Stability Fund Unclear role on advisory board

Basket fund for the Rule of Law

Chairs Steering Committee

Somaliland Development Fund Not clear/Consultative role at best

Peace-building Trust Fund for Somalia

None - only consultation on project choice

Fund for the Restructuring and Rebuilding of the Somali Security Sector

Unclear role on steering committee

Trust Fund in Support of the Somali Transitional Security Institutions

Not clear/Consultative role at best

Trust Fund in Support of the African Union Mission to Somalia

Not clear/Consultative role at best

Trust Fund to Support Initiatives of StatesCountering Piracy off the Coast of Somalia

Not clear/Consultative role at best

Special Finance Facility Chair Oversight Committee; manages bank account

Bring together all fund instruments under one umbrella coordination mechanism chaired by the Government

Establish Finance Committee chaired by Minister of Finance and Planning

Establish government led joint secretariat in Mogadishu to ensure transparency, accountability and effective monitoring of impact

Integrate all government and donor funded activities into single budget presentation

Quickly (as in Afghanistan) and not slowly (as in South Sudan)

According to the areas that Somalia prioritises and not just to the traditional donor priorities

That maximises the use of the government’s own systems

That builds government’s own capacity and doesn’t undermine it

In a transparent and accountable way to all Somalis

That delivers results in the most cost effective way

Somali Development and Reconstruction

Facility SDRF

Somali Development and Reconstruction

Facility SDRF

Priority Fund 1Priority Fund 1

Project Allocation

Project Allocation

Priority Fund 2Priority Fund 2 Priority Fund 3Priority Fund 3

Project Allocation

Project Allocation

High Level Steering

Committee

High Level Steering

Committee

Technical Finance

Committee

Technical Finance

Committee

Donor Funds are combined into a single Fund Account, managed and administered by Committee Finance Committee

Line Ministries and regions submit project proposals to request funding from the Priority Funds

Funds are allocated to specific a priority fund, e.g. Security. Priority Funds are administered by SFG and contributing donor/s

Composed of SFG and Donors and chaired by SFG Responsible for allocating funds from the Priority level to Projects

Composed of SFR and Donors and chaired by SFG and Responsible for making funding decisions at the priority level

Single Treasury Account

Single Treasury Account

Incorporate the comments today Continue the discussion with our partners

Support the SFF and allow it to demonstrate its effectiveness

Donors to place key decision makers in Mogadishu – this is best way of developing trust that is fundamental to effective aid partnership

Develop plan for service delivery

Thank You For Listening Questions and Discussions