Sabahi (Washington, DC)

25 January 2013

Somalia: Somali Government to Modernise Salary Payment System

Mogadishu — The Somali government will launch a new programme in April to pay government employees through an automated system controlled by the Central Bank of Somalia.

Minister of Finance and Planning Mohamud Hassan Suleiman told Sabahi that the programme is one of several initiatives aimed at modernising the country's financial system, balancing the budget, and curbing administrative and financial corruption.

Government employees currently are paid in cash by designated accountants in their respective ministries after funds are disbursed from the Central Bank. The accountants are responsible for collecting the funds from the bank and paying each employee after he or she signs a paper receipt of acknowledgement.

The process, which involves physically withdrawing and transporting large quantities of cash and filling out paper forms, often leads to delays in payments and misplacement of funds, Suleiman said.

The minister said the new system will prevent such delays and lead to better accountability and transparency in the management of public funds.

With the automated payment system, every civil servant will be issued an individual account at the Central Bank where their salaries will be transferred and accessible via a bank card at the beginning of each month.

The government also plans to levy taxes on cash remittance companies, telecommunication companies, qat, cigarettes, and on vendors in local markets, he said. Tariffs will also be imposed on goods coming through the ports of Mogadishu, Kismayo, Bosaso and Berbera.

"We will fight administrative and financial corruption and will implement plans that will allow us to collect more taxes and keep our promises to serve the Somali people," Suleiman told Sabahi.

Transparency International, a global civil society watchdog against corruption, ranked Somalia, Afghanistan and North Korea as the most corrupt out of 176 countries in its 2012 index.

Turbulent market situation

The government must take more steps to manage public funds in an effort to stabilise the economy, analysts told Sabahi.

Economist Bashir Mardadi Salah said a law should be enacted to ensure that salaries of public servants are paid in Somali shillings in order to stabilise its value against foreign currencies. Currently, foreign currency reserves in the Central Bank are estimated at $17 million and are declining at an accelerating rate, he told Sabahi.

Salah said the government should retain any foreign currency it has to build its reserves and bring into circulation the stacks of Somali shillings that were commissioned for printing during the transitional period but have not yet been released.

Economist Hiba Abdi Khalif said that strengthening the Central Bank's position will also help halt the manipulation of currency exchange rates by unregulated independent traders.

Even though Somalia's Central Bank re-opened in 2009, independent traders control exchange rates and are able to manipulate the market. Over the years, she said, traders have taken advantage of the economic turbulence created by the lack of regulations and the shortage of Somali shillings available for circulation to manipulate the exchange rates in their favour.

Khalif warned against the failure of the Ministry of Finance and Planning to arrest individuals involved in rate exchange manipulation, which has affected the lives of many Somali families that depend on remittances sent from abroad.

On January 17th, Somali President Hassan Sheikh Mohamud appointed economist Abdisalam Omer as the new governor of Somalia's Central Bank. Omer has worked at the World Bank and holds a doctorate in public administration from the University of Tennessee in the United States.

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