PFM Reform at a Crossroads: Can Somalia Stand on Its Own Feet?
Issue 6
Somalia’s public financial management (PFM) journey has come a long way – from patchwork fixes to a more rules-based system. But now, with donor support slowly pulling back, the big question is: can the country keep the momentum going on its own?
Digital Tools: Impressive, But Still Disconnected
Somalia’s digital finance systems – SFMIS at the federal level, BISAN for subnational governments, and Puntland’s standalone setup – have brought real improvements. Think biometric payrolls, real-time dashboards, and debt tracking. But here’s the catch: these systems don’t talk to each other.
Without interoperability, oversight is clunky, and reporting is inconsistent. What’s needed is a unified chart of accounts, secure APIs to link systems, and standardized templates so everyone’s speaking the same financial language. That’s how you turn data into decisions.
Strong Laws, Weak Enforcement
On paper, Somalia’s got the right tools: a PFM Act, a Treasury Single Account (TSA), IPSAS reporting, and procurement reforms. But enforcement is patchy, especially outside the capital. Biometric payrolls help weed out ghost workers, and procurement oversight is improving but without consistent rule enforcement, these wins risk fading.
The fix? Make the PFM Act truly operational across all federal member states. Train up finance staff (only about 30% have formal qualifications) and embed IPSAS reporting into everyday practice. Capacity isn’t just a buzzword; it’s the backbone of fiscal sustainability.
Budgeting: Structured, But Still Fragile
Somalia’s budgeting process now includes strategy papers and parliamentary approval, which is a step forward. But sticking to the budget calendar is hit-or-miss, and medium-term planning is still weak. Domestic revenue is low (around 5% of GDP), and donor funds still play a big role, making budgets vulnerable to external shocks.
To fix this, Somalia needs a solid Medium-Term Expenditure Framework (MTEF), better tax administration, and smarter forecasting that includes risk analysis. These aren’t just technical tweaks, they’re essential for building trust in the budget.
Transparency: Getting There, But Not Quite
Audit reports are published, which is great. But only half of the recommendations get implemented. Subnational reporting is uneven, and quarterly updates aren’t consistently shared.
The way forward? Set clear timelines for follow-ups, expand IPSAS-style public reporting, and build centralised data portals. Standardised templates and a federal repository would make it easier for parliament and citizens to hold the system accountable.
Intergovernmental Finance: Talking, But Not Yet Acting
Somalia has platforms for fiscal coordination, like the Finance Ministers’ Forum. But there’s no single authority overseeing all systems, and transfers between governments are often ad hoc and delayed. Revenue-sharing rules, especially for extractives, are vague and lack transparency.
What’s needed is codified rules for transfers, automatic stabilisers, and independent audits. Predictable, rule-based funding would reduce friction and help everyone plan better.
What Needs to Happen Next
To move from donor dependency to fiscal autonomy, Somalia needs to focus on six key areas:
We need to build capacity: Train finance staff, formalise internal audits, and invest in continuous learning. Only CBS has the required level of capacity in this area, which is unfortunate.
We need to institutionalise reforms and we need to do this fast: Make the PFM Act and IPSAS reporting part of everyday operations; at the moment, these are just on paper.
We need to connect the systems - otherwise what is the point!: Link SFMIS and BISAN with secure, standardised data flows.
We must urgently strengthen governance. The current state of affairs is unacceptable (still champions in corruption and elite capture!). It's time to introduce robust risk management frameworks and adopt performance-based approaches to drive accountability and results.
We need to safeguard stability: Develop a debt-management strategy and publish regular sustainability reports.
Engage locally: Bring subnational actors into budgeting and reform planning to boost legitimacy.
A Simple Three-Year Game Plan - for the govt that wants genuine and sustainable policy reforms
Year 1: Link up digital systems, publish a federal budget calendar, codify transfer rules, and pilot IPSAS reporting.
Year 2: Expand MTEF, reform tax administration, and scale up procurement oversight.
Year 3: Standardise reporting, finalise debt-management tools, and integrate subnational planning.
Final Thoughts: Turning Fragility into Resilience
Somalia has laid the groundwork; digitised systems, legal frameworks, and reform momentum. But the real test is whether these gains can survive without donor scaffolding. That means building institutions that are not just technically sound but politically and socially rooted. If Somalia can unify its fiscal framework, deepen domestic revenue, and formalise intergovernmental cooperation, it won’t just survive the donor exit - it’ll thrive beyond it.