Why the States halted cooperation with Federal Finance ministry

The package was meant to support actions to enhance economic resilience and investment in sectors such as fisheries and renewable energy to create jobs and spur growth as Somalia continues to face climate-related shocks.

News Keydmedia Online
Why the States halted cooperation with Federal Finance ministry

MOGADISHU, Somalia - The Ministries of Finance of the five regional states have said they suspended their cooperation with the Ministry of Finance of the Federal Government of Somalia.

The announcement was made through a joint press release issued on Tuesday. The Federal States accused the Ministry of Finance of withdrawing from 5 deals reached between 2019 and 2020.

The statement did not give further details on the broken agreements agreed upon in separate meetings that took place in Addis Ababa, Kampala, Nairobi, Kismayo, and Mogadishu.

What were the deals?

The World Bank and the IMF set conditions for the unification of the tax system, and the bank accounts should be transparent and submitted to the Ministry of Finance and available at any time.

These were part of the requirements of the debt relief program known as HIPC (Debt Relief Under the Heavily Indebted Poor Countries) which reached a decision point in March 2020.

In July this year, the World Bank approved a $100 million grant to support the continuation of Somalia’s reform efforts in reaching the Completion Point of the HIPC Initiative, when Somalia will be eligible for full and irrevocable debt relief.

The package was meant to support actions to enhance economic resilience and investment in sectors such as fisheries and renewable energy to create jobs and spur growth as Somalia continues to face climate-related shocks.

What sparked the row?

The Ministry of Finance of the federal government has received $100 million from the World Bank to support the country's budget and the regional states demanded at least 50% of this money to go to the accounts, according to Keydmedia Online sources.

The new government led by president Hassan Sheikh Mohamud wants to use this $100 million for the activities of the cabinet based in Mogadishu as it is still in a transition period where two administrations changed offices.

Some of the five agreements stipulated that the budget support from international donors should be distributed to the regional states.

Therefore, this is the case for all the regional states, some of which were directly dependent on the funds from the federal government based in Mogadishu.

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