Federal Republic of Somalia SOMALIA ECONOMIC UPDATE August 2019 | Edition No. 4 Building Education to Boost Human Capital Federal Republic of Somalia SOMALIA ECONOMIC UPDATE Building Education to Boost Human Capital August, 2019 AFRICA © 2019 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved This work is a product of the staff of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because the World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2019. Somalia Economic Update, Fourth Edition: Building Education to Boost Human Capital. © World Bank.” All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. TABLE OF CONTENTS ACKNOWLEDGEMENTS.............................................................................................................................. ii FOREWORD ................................................................................................................................................. iii HORDHAC .................................................................................................................................................... iv EXECUTIVE SUMMARY............................................................................................................................... v XOG KOOBAN............................................................................................................................................... ix PART I. Recent Economic Developments .................................................................................................... 2 1.1 Recent economic developments................................................................................................... 2 1.2 Medium-term outlook, risks, and challenges................................................................................ 10 1.3 The road ahead............................................................................................................................. 12 PART II. Building Education to Boost Human Capital.................................................................................. 16 2.1 The case for investing in education in Somalia............................................................................. 16 2.2 The education landscape in Somalia............................................................................................. 17 2.3 Service delivery challenges........................................................................................................... 23 2.4 Rebuilding Somalia’s education system........................................................................................ 27 APPENDICES .........................................................................................................................................35 LIST OF FIGURES Figure 1.1: Real GDP growth, 2013–18 ...................................................................................................... 2 Figure 1.2: Annual crop production, 2011–18............................................................................................ 2 Figure 1.3: Livestock population, 2013–18................................................................................................. 3 Figure 1.4: Poverty is high and deep among households in rural areas and IDP settlements.................... 4 Figure 1.5: Inflationary pressure eased in 2018 as food price inflation declined....................................... 5 Figure 1.6: Average cereal price inflation also eased in 2018 in most regions........................................... 5 Figure 1.7: Significant gains in FGS domestic revenue mobilization, 2013–19 .......................................... 7 Figure 1.8: FGS expenditures have grown but composition has not changed, percent of GDP.................. 8 Figure 1.9: External debt by creditor grouping, 2018................................................................................. 9 Figure 2.1: HCI and gross enrollment rates................................................................................................. 16 Figure 2.2: Somalia enrollment rates in comparative perspective.............................................................. 17 Figure 2.3: Distribution of schools by management type........................................................................... 18 Figure 2.4: Primary (incl. IQS) and secondary enrollment by location........................................................ 19 Figure 2.5: Primary and secondary enrollment by region and gender....................................................... 20 Figure 2.6: Survival rate to grade 5 (%) ...................................................................................................... 20 Figure 2.7: Literacy by age, gender and location........................................................................................ 21 Figure 2.8: Examination pass rates for Banadir and FMS - Grade 8 and Form 4 exams.............................. 21 Figure 2.9: Early Grade Reading Assessment results in FGS schools, 2013–15........................................... 22 Figure 2.10: Percentage of students that score 60%+ in Grade 7 Minimum Learning Assessment (MLA) by states and subjects, 2012..................................................................................................... 22 Figure 2.11: Two distinct systems of education cycles in Somalia: public and private................................. 24 Figure 2.12: Project disbursements by location in education, health, WASH, 2016–18............................... 26 Figure 2.13: Conceptual framework for rebuilding Somalia’s education system.......................................... 28 Figure 2.14: Prioritizing investments for schools furthest from the Fundamental Quality Level................. 30 Figure 2.15: National Education Development Fund.................................................................................... 33 LIST OF BOXES Box 1.1: Currency reform in Somalia............................................................................................................. 10 LIST OF TABLES Table 1.1: Selected economic indicators, 2015–2020................................................................................ 4 Table 1.2: Federal Government of Somalia fiscal operations, 2013–19..................................................... 6 Table 1.3: Selected financial sector indicators show that the financial sector is booming........................ 9 Table 2.1: Human Capital Index: Chad, Somalia and Sub-Saharan Africa.................................................. 16 Table 2.2: Different types of education service providers in Somalia by management............................. 18 ABBREVIATIONS AML/CFT Anti-money Laundering and Combating the Financing of Terrorism AMISOM African Union Mission in Somalia CAD Current Account Deficit CBS Central Bank of Somalia CWPM Correct Words Per Minute DEO District Education Officer DMU Debt Management Unit EGRA Early Grade Reading Assessment EMIS Education Management Information System ESSP Education Sector Strategic Plan FAO Food and Agriculture Organization FDI Foreign Direct Investment FGS Federal Government of Somalia FMS Federal Member States FUNDEF Fundamental Education Development Fund (Fundo de Desenvolvimento do Ensino Fundamental, FUNDEF) GCC Gulf Cooperation Council GDP Gross Domestic Product GER Gross Enrollment Rate GPE Global Partnership for Education GPI Gender Parity Index HCI Human Capital Index HIPC Highly Indebted Poor Countries Initiative IFI International Financial Institutions INGO International Nongovernmental Organization LMTO Large- and Medium-Taxpayers Office MLA Minimum Learning Assessment MoE Ministry of Education (FMS) MOU Memorandum of Understanding MoECHE Ministry of Education, Culture and Higher Education NGO Nongovernmental Organization PESS Population Estimation Survey PPP Purchasing Power Parity REO Regional Education Officer SHFS Somalia High Frequency Survey SDRF Somalia Development and Reconstruction Facility SSA Sub-Saharan Africa UNFPA United Nations Population Fund August 2 0 1 9 | Edition No. 4 i ACKNOWLEDGEMENTS This fourth edition of the Somalia Economic Update was prepared by a World Bank team led by John Randa and Huma Ali Waheed. The core team consisted of Catherine Ngumbau, Ephraim Kebede, Philip Schuler, Ousman Abdulahi Ali, Robin Horn, and Terri Horn. The team acknowledges contributions from Phil de Imus (IMF), Eugenia Konya, Susan Wangui, and Stessy Jabuya. The report benefitted from the comments of peer reviewers Dina Abu-Ghaida, Peter Darvas, Tobias Haque, and Tehmina Khan, and from Kimberly Parekh and Gianni Zanini. The team received guidance from Practice Managers Abebe Adugna, and Safaa El Tayeb El-Kogali, Country Director Bella Bird, Country Manager Hugh Riddell, and Program Leaders Inaam Ul Haq and Yutaka Yoshino. The team thanks donors to the Somalia Multi-Partner Fund for their gracious financial support. ii S om a l i a Eco n om i c Update FOREWORD It is my pleasure to present the fourth edition of the World Bank Somalia Economic Update series. Prepared in close partnership with Somali stakeholders, these reports aim to contribute to policy-making and the national conversation on topical issues related to economic recovery and development. In this edition, we note the country’s recovery from the devastating impact of the 2016/7 drought, the continued strengthening of public finances and an outlook of moderate GDP growth over the medium term. However, the country continues to face significant challenges and the forecasted poor harvest this year is a reminder of the cyclical climatic shocks that will stretch the fiscal and economic resources of the country in years to come. As the Federal Government prepares the 9th National Development Plan the imperative to sustain the ambitious reform agenda, normalize relations with International Financial Institutions and deliver tangible and inclusive benefits to people remain paramount. The special focus of this edition is the rebuilding of Somalia’s education sector to boost human capital. Human capital is a critical determinant of future growth and prosperity. Globally, it is estimated that 10 to 30 percent of differences in GDP per capita are attributed to differences in human capital. Building human capital depends on a country’s ability to educate its youth and children to become productive citizens. However, after years of fragility and under-investment, 3 million Somali children are estimated to be out of school and only half the population is literate. Nevertheless, there is reason for hope. The Ministry of Education, Culture, and Higher Education has in recent years initiated a range of positive steps, including the rollout of a national curriculum based on the Somali language. Through innovative partnerships with the private sector and leveraging technological advances, Somalia can make rapid strides to close the gap on quality and access. Investing in Somalia’s human capital will be essential if the country is to escape the trap of poverty and violence and move back onto the path to prosperity. We are particularly grateful to our colleagues at the Ministry of Finance and the Ministry of Education, Culture, and Higher Education who have provided guidance throughout the process. We hope all stakeholders will find this edition a useful contribution to the public dialogue on this critical sector. Hugh Riddell Country Manager, World Bank Somalia August 2 0 1 9 | Edition No. 4 iii HORDHAC Waxaa Sharaf ii ah inaan idiin soo bandhigo nuqulka Afaraad ee taxanaha Bangiga Aduunka xogtii ugu dambeysay Dhaqaalaha Soomaliya. Diyaarinta ayaa waxaa si dhow loola kaashaday Soomaalida, ujeedada warbixintan waa in ay kaabto diyaarinta siyaasadaha iyo doodaha heer qaran ee arrimaha la xariira Soo kabashada dhaqaale iyo horumarka. Nuqulkan, wuxuu hoosta ka xariiqayaa kasoo kabashada dalka saamaynta abaarihii darnaa ee sanadihii 2016/17, socoshada sii xoojinta hanaanka Maaliyada guud iyo muqaalka meel dhexaadka ah ee koboca wax soo saarka halbeegga dhaqaale (GDP) ee xilliga dhexe. Yeelkadeede, dalka ayaa wajahaya caqabado xooggan iyo odoroska ah xilliga gurashada dalaga beeraha oo liita sanadkan taasoo na xasuusinaysa is badalada cimilada sida lama filaanka ah u dhacaya taasoo saamayn doonta kheyraadka iyo dhaqaala dalka sanadaha soo socda. Ayadoo ay diyaarinayso Dowlada Federaalka ah ee Soomaaliya Qorshaha Qaran 9-aad ayaa waxaa jira joogtaynta hammiga isbadal doon ee hada socda ayadoo la soo celinayo xiriirka Hay’ada Dhaqaale ee Aduunka si loo gaaro faa’idada kobac loo dhanyahay bulshadana wada gaara. Nuqulkan ayaa si khaas ah xoogga u saaraya dib u dhiska waxbarashada Soomaaliya si sare loogu qaado kheyraadka aadamiga. Kheyraadka aadamiga ayaa muhiim u ah koboc iyo barwaaqo la gaaro mustaqalbka. Dunida qiyaastii 10 ilaa 30 boqolkiiba faraq ah ayaa waxaa koboca wax soo saarka halbeegga dhaqaale gudha (GDP) qayb ka qaato kheyraad aadamiga. Dhismaha Kheyraadka aadamiga ayaa ah mud ku xiran awooda dalka in wax la baro caruurta iyo dhalinyarada si muwaadiniintu u noqdaan kuwa wax soo saar leh. Si kastaba, kadib sanado badan oo habacsanaan ah iyo maalgalin yari 3 Malyan caruur Soomaali ah ayaa la qiyaasayaa inay dibada ka joogaan iskuulaadka ayadoo kalliya kala badh dadlka Soomaaliyeed ay wax akhrin karaan. Si kastaba, waxaa jira rajo. Wasaarada Waxbarashda, Dhaqanka iyo Tacliinta sare ayaa sanadihii dambe taabo galisay tallaaboyin wanaagsan ay ka mid tahay diyaarinta manhaj heer qaran oo ku diyaarsan afka hooyo. Iyadoo laga qayb galinaayo waxbarashada sida gaarka loo leeyahay lagana faa’iidaysanaayo tignooloyigada casriga ah, Soomaaliya waxay soo jari kartaa si sahlan faraqa hada jira ee dhinaca tayada iyo gaarsiinta bulshada. Maalgashiga kheyraadka banii’adamka Soomaaliya wuxuu asaas u yahay ka bixida faqriga, dagaalada iyo in cagta la saaro dhabadii hodanka. Waxaan si khaas ah ugu mahad celinaynaa saaxibada aan shaqo wadaaga nahay ee Wasaaradda Maaliyada iyo Wasaarada Waxbarashada, Dhaqanka iyo Tacliinta sare qaybtii ay ka qaateen Hanaanka diyaarinta xogtan. Waxaan ku rajo waynahay in bulshada inteeda ay ka faa’iidi doonaan doodaha laga yeelan doono qaybtan muhiimka ah. Hugh Riddell Maamulaha Banigaga Aduunka ee Soomaaliya iv S om a l i a Eco n om i c Update EXECUTIVE SUMMARY The economy is recovering slowly from drought, Public finances continued to strengthen in 2018. but Somalia must still deal with significant Revenue from taxes and other domestic sources challenges. grew by 29 percent. Changes in tax policies and Wide-ranging reforms have begun to rebuild improved tax administration helped to diversify Somalia’s economy and have achieved a measure central government revenue away from heavy of stability and modest growth. Over several reliance on customs duties and other trade taxes. decades, Somalia endured periods of unsustainable The additional revenue enabled the FGS to increase fiscal policies, macroeconomic instability, conflict, spending to 5.7 percent of GDP. FGS transfers to and state dissolution. In 2012 the new Federal Federal Member States (FMS) and other subnational Government of Somalia (FGS) embarked on governments increased slightly—from 9 percent ambitious reforms to reestablish institutions of spending in 2017 to 11 percent. Otherwise, the for economic governance. The authorities have composition of FGS spending changed little in 2018: been reconstructing the core laws, regulations, personnel spending again accounted for just over 50 and policies for taxation and management of percent of total FGS spending, and capital projects public spending; financial inclusion, integrity, and received only about 4 percent of the budget. stability; a competitive environment for business and an attractive investment climate; Credit to the private sector grew as well as telecommunications and rapidly in 2018, and Somalia’s other sectoral regulations. Between capacity to supervise the financial 2013 and 2016, real GDP averaged Financial sector sector continued to strengthen. 2.9 percent, inflation averaged about reforms are giving Bank lending to the private sector 1 percent, and the budget deficit the private sector grew by 56 percent—a slight averaged less than 0.1 percent of confidence to deceleration from 59 percent in GDP. This edition of the Somalia increase deposits and 2017. Financial sector reforms are Economic Update reviews recent banks confidence to giving the private sector confidence economic developments and the increase lending. to increase deposits and banks outlook for medium-term growth. confidence to increase lending. The Central Bank of Somalia (CBS) improved its After suffering a steep downturn during the inspection capacity and introduced institutions to 2016/17 drought, in 2018 the Somali economy combat money laundering. rebounded. Real GDP growth is estimated to have accelerated from 1.4 percent in 2017 to 2.8 In 2018 the current account deficit declined percent Better weather enabled a large increase in slightly, narrowing from 9.0 percent of GDP annual harvests—together the yields of maize and in 2017 to 8.3 percent. The total number of live sorghum grew by 39 percent. Animal production animals exported went up 6 percent, although also rebounded. As a result, food prices stabilized, this is still just over half the number exported in leading to a decline in inflation from 6.1 percent 2015, before the drought. Services exports grew by in 2017 to 3.2 percent. Money transfer services, about 3 percent in nominal terms and account for transport, telecommunications, wholesale and an estimated 45 percent of total exports. The trade retail trade, and other industries also enjoyed deficit, estimated at over 70 percent of GDP, was again healthy growth. financed mainly by remittances and official grants. August 2 0 1 9 | Edition No. 4 v Executive Summary The medium-term outlook is for a moderate deeper among rural residents and nomads, whose increase in GDP growth. Real GDP is projected to remoteness and mobility make them hard to reach. grow by 3.0–3.5 percent, an outlook predicated on Multiple deprivations in living standards, education, extension of the security gains and policy reforms health, water, and sanitation affect most Somali the authorities have achieved to date; it rests households. Nearly 70 percent of households critically on an assumption of reasonably favorable suffer deprivation in two or more dimensions of weather. More forceful financial sector regulation poverty. Somalia’s health indicators are among and more Central Bank capacity should facilitate the worst in the world. Access to education and deeper financial intermediation. By 2021 domestic learning outcomes are also low. Decades of conflict revenue collection is projected to approach 5 and state fragmentation have left the country with percent of GDP. This will create opportunities for a shortage of qualified teachers and poor school public investments in much-needed infrastructure infrastructure. Part 2 of this edition of the SEU and social services—notably education—that can takes an in-depth look at education in Somalia and rebuild human capital in Somalia. offers policy options for improving the sector. This outlook is subject to significant risks and Building education to boost human capital depends on continued policy reforms. The main Investing in Somalia’s human capital will be risks to medium-term growth prospects are essential for the country to escape a fragility security concerns, weather and climatic shocks, trap of economic exclusion and vulnerability and political uncertainty. The authorities have been and put it back on the path to building a track record of reform prosperity. Forty percent of in areas of revenue mobilization, Somalia’s population is aged 6 to expenditure control, and financial 18; this crucial demographic must Somalia needs to sector regulation. A slowdown in accelerate economic have the opportunity to acquire the reform momentum would not the knowledge, health and skills to growth and reorient only undermine medium-term government spending become productive contributors to economic growth but could also the national economy. Globally it towards public delay normalization of Somalia’s investment, particularly is estimated that 10 to 30 percent relations with international financial of differences in per capita GDP investment to boost institutions (IFIs) and access to is attributable to differences in human capital. critical external resources necessary national human capital. Focus on for development. the education sector will be critical for Somalia to improve its human capital. Finally, Somalia faces significant long-term challenges in accelerating economic growth However, Somalia faces enormous challenges and reorienting government spending toward to restore access to education and improve public investments to boost human capital. It is learning outcomes. In 2015/16 the country’s estimated that the population has been growing gross enrolment ratio for primary school was 32 faster than real GDP. As a result, the incidence of percent, with less than a quarter of children in poverty is still high—about 69 percent, according Galmudug, HirShabelle, Jubaland and Southwest to the latest estimates from Wave 2 of the States enrolled. This is compared to average gross 2018 Somalia High Frequency Survey. Poverty is enrollment of 74 percent in other low-income Sub- pervasive throughout the country, although both Saharan countries. Rural Somalis, IDPs, and nomads monetary and nonmonetary poverty are higher and have significantly fewer educational opportunities. vi S om a l i a Eco n om i c Update Executive Summary The share of rural Somalis without formal education Somalia could soon normalize relations with is 1.6 times higher than that of urban residents International Financial Institutions, creating an and 2.5 and 2.6 times higher for nomads and IDPs opportunity for a coordinated and sustained effort respectively. More than three quarters of schools to boost education access and quality for Somali were destroyed during the civil war; only 38 percent children across the country. Based on analytical of teachers are qualified and in the Federal Member work, policy dialogue with the authorities and States (FMS) only 13 percent of teachers serve rural international experience, this report proposes a areas. In addition, only 8 percent of teachers are conceptual framework for sector strengthening funded by the public sector, which allocates around focusing on teaching quality and scaled up access. 1 percent of total budget to education, with recent The following package of options is proposed: modest increases. The results are clear: only half • A national education development fund that of the population is literate, and women have less ensures adequate education financing across educational attainment than men across virtually the Federal Member States with incentives and all age-groups. Somalia’s school system will need to support to maximize student enrollments; be rebuilt from the ground up. • Partnerships with the non-state sector and communities to deliver affordable and quality In the long period of conflict, a patchwork of non- schooling in localities that are severely state, community and private sector actors has underserved today; emerged to help fill the access gap. More than half of students are enrolled in non-state schools. In • A fundamental quality-level framework for the less stable areas in the south and central parts schools backed up by a school improvement of the country, close to 90 percent are enrolled in fund that ensures that every school in Somalia nonstate schools, which have proven to be more offers adequate conditions for learning; resilient in the face of security challenges. More • Use of technology to provide adequate learning than 70 percent of secondary students are in support to teachers and students across Somalia; nonstate schools. • A student assessment system that routinely measures and enables actions to be taken on Despite the many challenges, the authorities the basis of what matters most – what students have been able to make progress in recent years, know and are able to do. laying the foundations for the provision of access to quality education. A national The underlying foundations of curriculum is being phased in the approach would need to with Somali as the language of consist of: (i) reliable data on the instruction throughout the country. Only half of the characteristics and performance A strong nonstate education population is literate, of students, schools, and other provision sector, which has shown and women have management entities; and (ii) resilience in the face of security less educational sufficient and predictable funding challenges, and affordable mobile attainment than men at all levels of government, with connectivity throughout the country across virtually all age- aligned donor funding, to support offer opportunities for leapfrogging groups. Rural Somalis, system improvement. and innovation. Importantly, there IDPs, and nomads has been progress in setting up have significantly monitoring systems that can be fewer educational further strengthened. opportunities. August 2 0 1 9 | Edition No. 4 vii XOG KOOBAN Dhaqaalaha ayaa kasoo yara kabanaya abaartii gaadiidka, isgaarsiinta, jumlada, taafiiqda iyo wax haseyeeshee Soomaaliya wali waxaa horyaalla soo saarka kale ayaa sameeyay kobac badqaba. caqabada aad u adag. Isbadalo balaaran oo dib loogu dhisayo Maamulka maaliyada ayaa sii xoogaystay dhaqaalaha Soomaaliya ayaa curtay taasoo sanadka 2018. Dakhliga laga xareeyo canshuuraha keentay in la gaaro yegleelida xasilooni iyo iyo dakhliyada kale gudaha ayaa sare u kacay kobac dhaqaale. Laabtankii sano ee lasoo dhaafay 29 boqolkiiba. Isbadallo la xariira siyaasadaha Soomaaliya waxay soo martay xaalado aan deganayn canshuuraha iyo maamulka oo lahagaajiyay ayaa oo isugu jira mid siyaasadeed, dhaqan dhaqaale, waxay caawiyeen in la yara dhimo ku tiirsanaanta isku dhacyo iyo dowlad la’aan. Dabshidkii 2012 ayaa dakhliga dowlada dhexe ee furdada iyo canshuuraha la unkay dowlad cusub oo Federaal ah (DFS) taasoo kale ee ganacsiga. Dakhiliyadaas dheeriga ah ayaa la timid rajada isbadalo dib u dhiska hay’adaha awoodeeyey in Dowlada Federaalka siyaadiso iyo hanaan dhaqaale ku tiirsan dowlad wanaag. kharashka 5.7 boqolika halbeegga wax soo saarka Hogaanka dowlada ayaa dib u unkay shuruucdii gudaha GDP. Sidoo kale waxaa siyaaday lacagaha asaasiga aheyd, Xeer hoosaadyadii iyo siyaasadiihii Dowlada Federaalka ah u wareejiyo Maamul maamulka iyo maareynta canshuuraha iyo bixinta Goboleedyada iyo dowlada hoose— 9 boqolkiiba kharashaadka; dhaqaale loo dhanyahay, hufnaan iyo sanadkii 2017 gaarayna11 boqolkiiba. Dhanka kale, xasilooni; bii’ad dhaqaale oo ku dhisan tartan xor ah Kharashaadka agabka Dowlada Federaalka ayaa iyo abuurida jawi soo jiita maalgalinta; sidoo kale isbadal yar sameey sanadka 2018: Mushaaraadka dajinta xeerarkii isgaarsiinta iyo sharci hoosaadyada shaqaalaha kharashka ku baxay ayaa ka sara maray la xariira. Intii u dhaxaysay sanadihii 2013 iyo 2016, 50 boqolkiiba guud ahaan Dowlada Federaalka ah halbeegga wax soo saarka gudaha (GDP) dhabtiisa iyo mashaaricda horumarint ayaa kaliya helay 4 ayaa isugeyn ahaa 2.9 boqolkiiba, halka sicir bararku boqolkiiba miisaaniyadda. ahaa qiyaas dhan 1 boqolkiiba GDP-ga. Nuqulkan Xogta dhawaan galka ah ee Dhaqaalaha Soomaaliya Amaahda shirkadaha ganacsiga gaarka loo leeyahay ayaa dib u milicsaneysa horumarka muqaalka guud ayaa sare u kac sameeyay sanadka 2018 iyadoo guud ee dhaqaalaha iyo koboca xilliga dhexe. ahaan Soomaaliya qaybaha dhaqaale ay sii wadaan xoogaysi. Amaahda Bangiyadu siiyaan shirkadaha Kadib hoos u dhac dhaqaale baaxadleh oo ka gaarka loo leeyahay ayaa kobcay 56 boqolkiiba— dhashay abaarihii inta lagu guda jiray sanidihi yara hoos u dhac kolka la barbar dhigo 59 boqolkiiba 2016/17 ayaa waxaa jira kabasho dhaqaale sanadka 2017. Hagaajinta lagu sameeyay hay’adaha 2018. halbeegga wax soo saarka gudaha (GDP) dhaqaalaha ayaa siiyay kalsooni shirkadaha ganacsi ayaa qiyaas ahaan ka kacay 1.4 boqolkiiba sanadkii gaarka loo leeyahay ah taasoo sare u qaaday keydka 2017 gaareyna 2.8 boqolkiiba kadib markii cimiladu Bangiyada iyo kalsooniada Bangiyadu ku qabaan inay saamaxday sare u kaca gurashada delagga beeraha amaah bixiyaan. Bangiga dhexe Soomaaliya ayaa —isugeyn Haruurka ayaa sare u kacay 39 boqolkiiba. sare u qaaday awoodaha dabagalka iyadoo banigigu Wax soo saarka xoolaha ayaa soo kabtay si lamid ah. soo bandhigay la dagaalanka lacagaha la dhaqo. Arintan ayaa waxay keentay in qiimaha raashinku Waxaa layara dhimay hoos u dhicii koontootada dago taasoo keentay hoos u dhac ku yimaada dowladaI sanadka 2018, taasoo yaraysay 9.0 sicirbararka oo ahaa 6.1 boqolkiiba sanadkii 2017 boqolkiiba halbeegga wax soo saarka gudaha noqdayna 3.2 boqolkiiba. Adeegyada xawaaladaha, (GDP) 2017 gaartayna 8.3 boqolkiiba. Isugaynta August 2 0 1 9 | Edition No. 4 ix Xog kooban xoolaha nool ee la dhoofiyay ayaa sare u kacay 6 Kama dambeys, Soomaaliya ayaa wajahaysa boqolkiiba, inkastoo ay tahay kala bar tiradii la caqabado xilliga dheer ah dhinaca xoojinta kobaca dhoofiyay sanadkii 2015, ka hor abaarta. Adeegga dhaqaalaha iyo dib u habaynta kharashaadka dhoofinta ayaa kobcay 3 boqolkiiba noqdayna dowlada ee ku baxa adeegyada bulshada si sare qiyaas dhan 45 boqolkiiba isu gayn guud ahaan kor loogu qaado kheyraadka banii’adamka. Waxaa walxaha la dhoofiyay. Hoos u dhaca ganacsiga ayaa la qiyaasayaa in tirade dadku koror ka sareeya kii la lagu qiyaasay 70 boqolkiiba halbeegga wax soo filyay sameysay kolka loo eego dhabta halbeegga saarka gudaha (GDP) kaasoo xooggisa ay kabeen wax soo saarka gudaha (DGP). Natiijaduna waxa xawaaladaha iyo deeqaha dibada. weeye in faqrigu wali aad u sareeyo tira gaaraysa 69 boqolkiiba, qiyaasihii u dambeeyay ee la sameeyay Milicsiga xilliga dhexe ayaa sameeyay yare sare u kac xog ururinta Wave 2 (Hirka labaad) sanadka 2018 dhinaca halbeegga wax soo saarka gudaha (GDP). tira koobkii laga sameeyay Soomaliya. Saboolnimada Dhabta GDP ayaa la odorosay kobac dhan 3.0–3.5 ayaa ah mid ku baahsan dalka guud ahaan, labadaba boqolkiiba, ayadoo la qiyaasay miraha ka dhashay dhinacba lacagta iyo walxaha aan lacagta ahayna amniga hagaagay iyo isbedalada siyaasadeed ay saboolnimada ayaa saameynta u wayn ku yeelatay dowladu gaartay ilaa iyo iminka; isku halaynta jawi reer miyiga iyo xoolo dhaqata, kuwaas ay adagtahay nabadeed ayaa qayb wayn ka qaatay odoroska. deeganadooda in lagaaro. Dhinac kala duwan ayuu Hay’adaha maaliyada oo xooggan, xeerarka iyo saameeyay sida Cimriga, Caafimaadka, Biyaha iyo awoodda Bangiga dhexe ayaa saamaxaya hormar Nadaafad la’aan baahsan. Ku dhwaad 70 boqolkiba hay’adaha shaqada kuleh dhaqaalaha. Dakhliga dadka waxaa aad u sameeyay saboolnimada. gudaha ayaa la filayaa inuu gaaro sanadka 2021 Jaantusayaasha caafimaad ee dunida ayay boqolkiiba 5 halbeegga wax soo saarka gudaha Soomaaliya uga jirtaa Meesha ugu liidata. Helida (GDP). Tan ayaa abuuri doonta fursado maalgashi waxbarasho ayaa ah mid aad u hoosaysa si lamid ah. ayadoo ay jirto baahi dib u dhis kaabayaasha Sanado badan oo dagaal sokeeye iyo burbur qaran dhaqaalaha iyo adeegga dadweynaha-gaar ahaan ayaa dalka ka dhigay mid ay ku yaryihiin macalimiinta waxbarashada-taasoo dib u dhisaysa kheyraadka waxbara ee xirfadlayaasha ah iyo dhismo xumada banii’aadamka Soomaaliya. goobaha waxbarasho. Qeybta 2-aad ee noqolkan (SEU) wuxuu si qoto dheer u eegayaa waxbarashada Waxaa jira wajahida caqabado adag iyadoo lasii Soomaaliya ayadoo lasoo bandhigayo siyaasado si wadi doono siyaasadaha hagaajinta. Caqabadaha loo hagaajiyo waxbarashada. laga yaabo in la wajaho kobaca xilliga dhexe ayaa waxaa ugu horeeya shakiga laga qabo amni Dhisida waxbarashada sis are loogu qaado xumaada, Cimilada dunida ayaa isbadalaysa iyo kheyraadka banii’aadamka xasilooni la’aan siyaasadeed. Hogaanka dowlada Maalgashiga kheyraadka banii’adamka Soomaaliya ayaa dhisay hanaan tixraac isbadalo socda ee wuxuu asaas u yahay dalku inuu ka baxo xaaladaha dhinacyada ururinta dekhliga, xadida Kharashaadka nugul, dhaqaale xumada kaas oo dalka gaarsiinaya iyo sharciyeynta hay’adaha dhaqaalaha. Hoos u dhac barwaaqo. 46 boqolkiiba tirada dadka Soomaaliya ku yimaada isbadalada la wado wuxuu dhaawici ayaad da’doodu tahay 6 sano jir ilaa 18 sano; karaa kobaca dhaqaalaha ee xilliga dhexe sidoo kale qaybahan bulshada waa muhiim in ay helaan fursado wuxuu waxyeeli karaa in dib loo yagleelo xiriirka waxbarasho, caafimaad iyo xirfado ay kaga qayb Soomaaliya iyo Hay’adaha dhaqaalaha Aduunka qaataan waxsoo saarka dalka. Qiyas ahaan 10 ilaa 30 iyo halida taageerada dhaqaale ee dibada taasoo boqolkiiba halbeegga wax soo saarka gudaha (GDP) muhiim u ah horumarka. faraq ah ayaa ka qaata kheyraadka bani’aadamka x S om a l i a Eco n om i c Update Xog kooban heer qaran. Waxbarashada oo xoogga la saaraa waa sideeda ah ayadoo ay jiraan caqabado amni. mid muhiim ah Soomaliya si loo sare loogu qaado Inkabadan 70 boqolkiiba dugsiyada sare waxay kheyraadba bani’aadamka. dhigtaan iskuulaad aan dowli ahayn. Sikasataba, Soomaaliya waxay wajahaysaa Ayadoo ay jiraan caqabado badan, dowlada ayaa caqabadaha in dib loo soo celiyo helida tacliinta samaysay horumaro la taaban karo sanadihii dambe iyo hagaajinta heerka wax soo saar aqooneed. ayadoo salka loo dhigay asaaska waxbarasho tayo sanadihii 2015/16 Dalka tirade inta iskuulaadka leh. Waxaa la diyaariyay manhaj heer qaran guud waxbarashada hoose iska diiwaangaylisay waxay ahaan dalkoo dhan kaasoo ku qoran afka hooyo. ahayd 32 boqolkiiba, ka yar rubuc caruurta ku nool Waxbarashada aan dowliga aheyn ee xooggan Galmudug, Hirshabeelle, Jubbland iyo Koonfur taasoo u babac dhigtay caqabadaha amni iyo adeeg Galbeed. Kolka la barbar dhigo boqolayda isugaynta isgaarsiin oo jaban guud ahaan dalkoo dhan ayaa inta iska diiwan galisay oo ah 74 boqolkiiba dadka abuuray fursado iyo hal abuur, ayadoo la sameeyay dakhliguudu liito ee ku nool dalalka ka hooseeya hanaan lagu kormeero kaasoo lasii xoojiyay. Saxaraha. Reer miyiga Soomaalida, reer guuraga ayaa ay aad u yaryihiin fursadahooda waxbarasho. Soomaaliya ayaa dhawaan caadi kusoo celin Qaybta dadka ku nool baadiyaha ee aan helin doonta xiriirkii ay la lahayd hay’adaha dhaqaalaha waxbarashada caadiga ah waxay1.6 jeer ka saraysaa ee dunida, taasoo abuuri doonta fursad, isku dadka degan magaalooyin oo ka sareeya 2.5 iyo xir iyo dadaalka joogtada ah ee tayada tacliinta 2.6 jeer reer guuraaga iyo barakayaasha sida ay isu ubadka Soomaaliya sare loogu qaadayo guud xigaan. Inkabadan sedex rubuc iskuulaadkii waxay ku ahaan dalka. Ayadoo la raacayo ablabalayn la burbureen dagaaladii sokeeye; kaliya 38 boqolkiiba sameeyay, wada hadal ku dhisan siyaasad ayaa ayaa ah macalimiin xirfad leh sidoo kale Dowlad dowlada iyadoo la kaashanayo khibradaha beesha Goboleedyada kaliya 13 boqolkiiba macalimiinta caalamka, warbixintan waxay soo jeedinaysaa ayaa ka howl gala baadiyaha. Taa waxaa dheer, kaliya yagleelida hanaan iyo xoojinta heerka tayo ayadoo 8 boqolkiiba macalimiinta waxaa kharashkooda sare loo qadayo in cid walba heli karto. Waxaa lasoo bixiya dowlada, qoondahooda ayaa ah1 boqolkiiba jeedinayaa talooyinka hoos ku xusan: miisaaniyada guud ee waxbarashada ayadoo ay • Yagleelida Sanduuqa horumarinta waxbarashada jirto kordhin yar. Natiijadu waa mid iska cad: kaliya kaas oo hubinaya in la maalgaliyo waxbarasho kala bar tirade dadka ayaa wax qori kara, ayadoo tayo leh dhamaan dowlad goboleedyada haweenka waxbarashadoodu aad uga hoosayso xoogana la saarayo in la kordhiyo tirade dadka dhinacyada kale duwan ee bulshada. Iskuulada iska qoraya iskuulaadka; Soomaaliya ayaaa u baahan doona dib dhis laga bilaabayo asaaska. • Iskaashi lala sameeyanyo hay’adaha waxbarasho aan dowliga ahayn iyo bulshooyinka si loo Dagaalada oo dheeraadaaay, dowlad la’aan ayaa gaarisyo bulshada iskuulaad iyo waxbarasho hay’ado ganacsi gaar loo leeyahay buuxiyeen tayo leh taasoo gaaraysa bulshada qayaheeda doorkii waxbarasho ee banaanaa. Inka badan ugu liita manta; kala bar ardayda ayaa iska qoray iskuulaadka aan • Heer tayo asaasi u ah hanaanka iskuulaadka lagu dowlada hoos imaanin. Meelaha aan degenayn kabay sanduuqa hagaaninta taasoo xaqiijinaysa ee koofurta iyo bartamaha dalka, ku dhawaad iskuul walba oo Soomaaliya ku yaalla inuu ku 90 boqolkiiba waxay iska qoreen iskuulaadka sugnaado jawi wax lagu baran karo.; aan dolwada hoos iman, taasoo muujinaysa mid August 2 0 1 9 | Edition No. 4 xi Xog kooban • Adeegsiga tignoloogiyada si losoo saaro tacliin la Waa in hoosta laga xariiqaa asaaska hanaanka loo isku halayn karo taasoo saacidaysa macalimiinta baahanyahay ka kooban: (i) xog la isku haleyn karo iyo ardayda guud ahaan Soomaaliya; dhinaca astaamaha iyo tayada ardayda, iskuulaadka • Hanaan qiimeeya arday kaasoo si joogta ah iyo howlaha maamul;(ii) Maalin galin ku filan la u cabiraya ogolaanayana falcilin meelaha iskuna haleyn karo dhamaan qaybaha dowlada muhiimada sare leh– Maxay yaqaanan ardaydu taasoo lagu laray maalgalinta deeq bixiyayaasha si ama samayn karaan. loo hagaajiyo habka taageero. RECENT ECONOMIC DEVELOPMENTS August 2 0 1 9 | Edition No. 4 1 Recent Economic Developments 1. Recent Economic Developments 1.1 Recent Economic Developments (Figure 1.2). The country experienced above-average rainfall in the 2018 Gu season (April–June), with Somalia’s economy recovered in 2018. rains reportedly the heaviest in nearly two decades.2 In 2018 Somalia’s economy rebounded from the This has had two effects: the high precipitation 2016/17 drought (Figure 1.1). Real GDP grew by an helped push up crop production in rain-fed areas estimated 2.8 percent, up from 1.4 percent in 20171 and off-season harvests in riverine areas; but the but lower than the forecast of 3.2 percent growth in flooding that resulted led to crop damage in most the previous edition because of newly available trade riverine areas, mainly along the Shabelle River in and fiscal data for 2018 and a revised assessment the Hirran, Middle and Lower Shabelle, and Middle of the recovery from the drought. A rebound in Juba regions. On balance, aggregated Gu cereal agricultural production and private investment (both production in 2018 was 14,000 tons, almost 60 domestic and foreign) and sustained remittances and percent higher than the average of the previous donor inflows contributed to the continued recovery five years.3 However, the expected above-normal in 2018. While supply-side national accounts data are 2018 Deyr (October–December) rainfall did not not available, other indicators point to agriculture materialize: rains recorded across most parts of the and services—especially the financial, transport, country were significantly below average. As a result, telecommunications, and other services—as the cereal production including off-season harvests in drivers of growth. southern Somalia was an estimated 22 percent than the long-term average for 1995–17.4 Still, the 2018 Agriculture, the mainstay of the Somali economy, above-average Gu season crop production helped continued to recover from the impact of the increase total crop and animal production, which drought. Production of cereals and other major combined with sustained large-scale humanitarian crops stabilized in 2017 and rebounded in 2018 assistance was able to stabilize food availability. Figure 1.1: Real GDP growth, 2013–18 Figure 1.2: Annual crop production, 2011–18 4.0 175 3.5 Output volume (100 = 2011-13) 150 3.0 125 Real GDP growth 2.5 100 2.0 75 1.5 50 1.0 25 0.5 2011-13 2014 2015 2016 2017 2018 avg 0.0 2013 2014 2015 2016 2017 2018 e Cowpeas Sesame Maize Sorghum Source: IMF and World Bank staff calculations. Source: FAO Somalia. Note: 2018 is a preliminary estimate. 1 GDP estimates reported in this version of the SEU incorporate the household consumption estimate from Wave 2 of the Somalia High Frequency Survey (SHFS), which was completed in 2018, using an estimation method described in the appendix. One point worth noting here is that these GDP estimates understate the actual year- to-year variation in economic activity in Somalia. 2 FAO GIEWS. Crop Prospects and Food Situation, September 2018. 3 Ibid. 4 FSNAU-FEWS NET. Technical Release, February 2019. 2 S om a l i a Eco n om i c Update Recent Economic Developments The livestock sector also continued to recover from mainly due to the difficult security conditions, the the drought, although livestock exports remained harsh business environment, and other constraints subdued. The size of the national herd rebounded on private investment. Various global rankings rate in 2018, although populations of goats, camels, and Somalia as one of the least competitive economies sheep are still below pre-drought levels (Figure 1.3). regionally and globally—and the leading constraints The above-average Gu rains also helped improve birth on its competitiveness are weak institutions and rates and restocking of the livestock sector, which has governance, a poor business environment, and resulted in a gradual pick-up of livestock production dilapidated infrastructure and social services. in pastoral regions and made more milk available in northern, central, and southern Somalia during Growth, however, has not been sufficient to Deyr season (October– December).5 In the northern reduce poverty and central regions, where significant livestock With the population growing at an annual average losses occurred during the drought, recovery is not of 2.9 percent for the last five years, real GDP growth yet complete, reducing the coping mechanisms of has not been sufficient to boost per capita income.7 poor households.6 Exports of live animals are also As a result, poverty remains high and widespread still minimal, reflecting both lingering effects of the (Figure 1.4). More than 69 percent of Somalis live on drought and import restrictions imposed by Saudi less than $1.90 per day, in 2011 purchasing power Arabia and the United Arab Emirates in December parity (PPP) terms.8 Monetary and nonmonetary 2016. Total live animal exports went up only 6 poverty are higher and deeper among rural residents percent in 2018 and are still about 50 percent lower and nomads whose remoteness and mobility make than in 2015. them hard to reach. Consequently, poverty gaps are high, so that considerable resources are needed to Figure 1.3: Livestock population, 2013–18 lift them out of poverty. IDPs face unique challenges 175 beyond extremely high poverty, including tenure insecurity and dislocation from social networks and Animal population (100 = 2013) 150 former livelihoods. With most Somalis vulnerable to 125 many forms of shocks, building resilience is essential. 100 Poverty is manifested along other dimensions 75 beyond consumption or income.9 Multiple 50 deprivations in living standards, education, health, 25 water, and sanitation affect most Somali households. 2013 2014 2015 2016 2017 2018 Nearly 70 percent of households suffer deprivation Cattle Goat Camel Sheep in two or more dimensions of poverty. There are Source: Bank staff estimates using data from FSNAU and MFLR. large variations by population group, with nomads suffering most and urban dwellers the least. Money transfer services, transport, Nevertheless, the latest household survey data telecommunications, wholesale and retail trade, reveal that, on average, Somalis enjoy better and other services have been driving private sector access to improved water and sanitation and to economic activity. The share of manufacturing in electricity than do their counterparts in many GDP and its contribution to growth have been small, other African countries.10 5 Ibid. 6 Ibid. 7 Real per capita GDP is estimated to have declined to $311 in 2018 (preliminary data) from $316 in 2013. One should be cautious in assessing the change in real GDP over time as the largest component of GDP—household consumption—is proxied by a constant. 8 World Bank, “Somali Poverty and Vulnerability Assessment: Findings for Wave 2 of the Somali High Frequency Survey,” July 2019. 9 Ibid. 10 The cost of electricity is much higher in Somalia than in neighboring countries. August 2 0 1 9 | Edition No. 4 3 Recent Economic Developments Figure 1.4: Poverty is high and deep among households in rural areas and IDP settlements a.Poverty incidence b. Poverty gap (% of poverty line) 100 Overall average (survey estimates) 50 Overall average Poverty gap (% of poverty) 80 40 Percent of population 60 30 40 20 20 10 0 0 Mogadishu Other urban Rural IDPs in Nomads Mogadishu Other urban Rural IDPs in Nomads settlements Source: World Bank, “Somalia Poverty and Vulnerability Assessment,” 2019. Note: Columns represent point estimates. Thin lines at the top of columns show the confidence intervals around these point estimates. Table 1.1: Selected economic indicators, 2015–2020 2015 2016 2017 2018e 2019f 2020f GDP, nominal (U.S. dollars) 4,049 4,198 4,509 4,721 4,958 5,218 real GDP growth 3.5 2.9 1.4 2.8 2.9 3.2 per capita GDP, nominal (U.S. dollars) 310 313 327 332 339 347 Poverty incidence ($1.90/day PPP) 69 Money and prices CPI inflation rate (end of period) 0.3 1.2 6.1 3.2 3.0 2.7 Private credit growth rate (end of period) .. 46.1 59.3 53.5 .. .. Fiscal (central government) share of GDP Total revenue and grants 3.5 4.1 6.0 5.7 6.9 7.2 o/w external grants 0.7 1.4 2.8 1.8 3.0 2.9 Total expenditure 3.3 4.2 5.4 5.7 6.9 7.0 o/w Compensation of employees 1.3 1.3 2.8 3.0 3.2 3.3 o/w Transfers to subnational 0.3 0.2 0.5 0.6 0.7 0.7 Overall balance 0.1 -0.1 0.1 0.2 0.1 0.2 External share of GDP, unless otherwise indicated Current account balance -6.0 -9.4 -9.0 -8.3 -8.3 -8.0 Exports of goods and services 25.6 25.4 22.1 25.9 26.8 26.5 o/w Live animals 12.3 11.7 11.8 Imports of goods and services 98.5 99.9 102.6 99.6 99.4 97.6 Remittances, private transfers 32.9 32.5 31.5 29.2 28.8 29.1 Official grants 34.9 33.3 40.8 36.9 36.3 34.7 FDI 7.4 7.9 8.2 8.6 9.0 8.9 External debt 112.4 107.4 104.3 99.5 .. .. Exchange rate (Somali shilling/U.S. dollar) 22,285 24,005 23,605 24,475 .. .. Source: Staff estimates, IMF, UN Comtrade. Note: Livestock exports are based on data reported by trade partners. 4 S om a l i a Eco n om i c Update Recent Economic Developments In 2018, as food prices stabilized, inflationary Shebelle (35 percent) and North-east (30 percent) pressure eased regions were the highest; in Central Somalia the Inflation declined from 6.1 percent in 2017 to decline was 19 percent (Figure 1.6A). Similarly, 3.2 percent, as agricultural production rose, and average red sorghum prices declined by 27 percent international oil prices fell (Figure 1.5). The stable in the Central regions, 22 percent in Shebelle, 17 exchange rate—the Somali shilling depreciated percent in Northeast, 8 percent in Juba Valley and by 3 percent against the U.S. dollar in 2018—and 7 percent in North-west (Figure 1.6B). Prices in the substantial dollarization of transactions helped to North-west and North-east regions, although lower, stabilize domestic prices. were still relatively high. Cereal price inflation declined in most regions Fiscal policy performance continued to improve in 2018 due to increased production after the The federal government maintained a balanced protracted drought in 2017 (Figure 1.6). Average budget in 2018 while significantly improving maize prices declined by about 20 percent on mobilization of domestic resources.11 The average in 2018 compared to 2017. The declines in government’s continued efforts to broaden the tax Figure 1.5: Inflationary pressure eased in 2018 as food price inflation declined 14.0 12.0 10.0 8.0 Inflation, percent 6.0 4.0 2.0 0.0 -2.0 -4.0 -6.0 Dec - 15 Jan - 16 Feb - 16 Mar - 16 Apr - 16 May- 16 Jun - 16 Jul - 16 Aug - 16 Sep - 16 Oct - 16 Nov - 16 Dec - 16 Jan - 17 Feb - 17 Mar - 17 Apr - 17 May- 17 Jun - 17 Jul - 17 Aug - 17 Sep - 17 Oct - 17 Nov - 17 Dec - 17 Jan - 18 Feb - 18 Mar - 18 Apr - 18 May- 18 Jun - 18 Jul - 18 Aug - 18 Sep - 18 Oct - 18 Nov - 18 Dec - 18 Overall Food Source: Computations based on FSNAU and MoF, Directorate of National Statistics data. Figure 1.6: Average cereal price inflation also eased in 2018 in most regions a. Average white maize prices, US$/Kg b. Average red sorghum prices, US$/Kg 1.4 1.4 1.2 1.2 1.0 1.0 0.8 0.8 0.6 0.6 0.4 0.4 0.2 0.2 - - Jan -13 Apr -13 Jul-13 Oct -13 Jan -14 Apr -14 Jul-14 Oct -14 Jan -15 Apr -15 Jul-15 Oct -15 Jan -16 Apr -16 Jul-16 Oct -16 Jan -17 Apr -17 Jul-17 Oct -17 Jan -18 Apr -18 Jul-18 Oct -18 Jan -19 Jan -13 Apr -13 Jul-13 Oct -13 Jan -14 Apr -14 Jul-14 Oct -14 Jan -15 Apr -15 Jul-15 Oct -15 Jan -16 Apr -16 Jul-16 Oct -16 Jan -17 Apr -17 Jul-17 Oct -17 Jan -18 Apr -18 Jul-18 Oct -18 Jan -19 Central Juba Valley Shebelle North-west North-east Central Juba Valley Shebelle North-west North-east Source: Computations based on FSNAU and MoF, Directorate of National Statistics data. 11 Coverage of fiscal policy in this edition of the SEU is limited to the central government, the FGS. The World Bank’s forthcoming Programmatic Public Expenditure Review will feature a module that analyzes fiscal operations of the general government (central government plus subnational jurisdictions), subnational public finance, and the structure of FMS-FGS fiscal relations. August 2 0 1 9 | Edition No. 4 5 Recent Economic Developments base, enhance compliance, and improve collection of domestic revenue in 2013–18, non-tax revenue capacity increased domestic revenue by 0.7 percent averaged 20 percent, and tax on goods and services of GDP (Table 1.2). This partially compensated for averaged 6 percent. Income and corporate taxes, a decline in donor grants received by the FGS.12 though increasing, are still virtually untapped, The additional domestic revenue helped to finance demonstrating the possible inequity of the current higher spending on compensation of employees and Somali taxation system. In 2013–18 income taxes transfers to subnational jurisdictions—the two items constituted only 2 percent of total domestic that account for two-thirds of total FGS expenditure. revenue. However, with the new reforms, which include establishing and operationalizing a Large- Revenues and Medium-Taxpayers Office (LMTO), continued Total domestic revenue grew to 3.9 percent of expansion of the income and corporate tax base has GDP in 2018, up from 3.2 percent (Figure 1.7b). boosted collection in 2018 to $8.6 million in 2018, a Trade taxes accounted for an average of 69 percent 150 percent increase over 2017. Table 1.2: Federal Government of Somalia fiscal operations, 2013–19 2013 2014 2015 2016 2017 2018 2019* (percent of GDP) Total Revenue and Grants 2.7 3.7 3.5 4.1 6.0 5.7 6.9 Domestic revenue 1.7 2.2 2.8 2.7 3.2 3.9 4.0 Tax revenue 1.6 1.8 2.0 2.1 2.5 2.9 2.8 Taxes on income and profits 0.02 0.03 0.05 0.06 0.08 0.18 0.18 Taxes on international trade 1.5 1.6 1.8 1.8 2.1 2.1 2.0 Taxes on goods and services 0.0 0.1 0.2 0.1 0.2 0.5 0.5 Other taxes 0.2 0.2 0.2 0.1 Non-tax revenue 0.1 0.4 0.8 0.6 0.7 0.9 1.2 External grants 1.1 1.5 0.7 1.4 2.8 1.8 3.0 Bilateral donors 1.1 0.6 0.1 0.7 1.8 0.5 0.6 Multilateral donors 0.9 0.6 0.6 1.0 1.3 2.4 Total Expenditure 3.0 3.8 3.3 4.2 5.4 5.7 6.9 Recurrent expenditure 3.0 3.8 3.3 4.1 5.3 5.5 6.4 Compensation of employees 1.3 1.9 1.3 1.3 2.8 3.0 3.2 Use of goods and services 1.4 1.5 1.3 1.5 1.8 1.7 2.4 Transfers to subnational governments 0.2 0.3 0.3 0.2 0.5 0.6 0.7 Contingency and other expenses 0.1 0.1 0.1 0.2 0.1 0.1 0.1 Repayment of arrears and advances 0.0 0.1 0.3 0.8 0.2 0.0 0.1 Capital expenditure 0.0 0.0 0.1 0.1 0.1 0.2 0.5 Transfers to offshore govt. deposits 1.1 Drawdown of offshore govt. deposits 0.7 0.1 Fiscal Balance -0.3 -0.1 0.1 -0.1 0.1 0.2 0.1 Source: Staff calculations using Ministry of Finance and IMF data. Notes: The unspent portion of a large bilateral budget support grant received in 2017 is reported here as a net purchase of a financial asset. Data for 2019 are from the approved budget, updated with outturn information from the first quarter. Table 1.2 shows that bilateral receipts were especially large in 2017, due the receipt of a $50 million budget support grant. This grant exceeded the government’s 12 financing needs in 2017, and the government retained a large share of it as a reserve in its offshore accounts. It drew down a portion of these reserves in 2018. 6 S om a l i a Eco n om i c Update Recent Economic Developments Figure 1.7: Significant gains in FGS domestic revenue mobilization, 2013–19 a. Total Revenue 4.0 b. Composition of Domestic Revenue 7.0 6.0 3.0 43% 5.0 34% 47% Share of GDP share of GDP 4.0 2.0 3.0 40% 19% 34% 38% 2.0 1.0 1.0 0.0 0.0 2013 2014 2015 2016 2017 2018 2019* 2013 2014 2015 2016 2017 2018 2019* Non-tax revenue Other taxes Tax on goods & services Domestic revenue External grants (share shown as data label) Tax on int'l trade Tax on income Source: Staff computations based on FGS MoF data. Note: Data for 2013–18 are actual; data for 2019 are budgeted. The new tax reforms and administrative measures 1.5 percent of GDP.13 Grant receipts were unusually have had a general positive impact—domestic high in 2017 at 2.9 percent of GDP, accounting for revenue grew by 29 percent in 2018. The re- 47 percent of total revenue (Figure 1.7a), due introduction of sales tax (replacing a presumptive in large part to a one-time $50 million budget tax), especially on telecoms, ports, and hotels; support grant from a bilateral donor.14 The decline launch of the LMTO; and introduction of risk-based to 1.9 percent of GDP in 2018 reflects both this assessment on imported goods brought in $13 base effect and also an unplanned reduction in million more in taxes on goods and services in 2018. aid from another donor. In 2018, multilateral An increase in the tax rate for khat and tobacco owing grants overtook bilateral aid in Somalia for the to fiscal dialogue with the FMS yielded another $1.4 first time. Three donors—the World Bank, Saudi million of revenue in 2018, and expansion of the Arabia, and Turkey—accounted for more than income and corporate tax bases added $5.2 million 90 percent of the total donor grants in 2015–18. more. These tax reforms led to the positive outcomes, Bilateral commitments have proven more volatile, coupled with administrative measures, particularly with a high probability of not being realized, and modernizing revenue payments, cancelling private multilateral commitments tend to record low revenue collection contracts, consolidating revenue disbursement ratios: 48 percent in 2015, 32 percent collection under the Ministry of Finance (MoF), in 2016, and 50 percent in 2017. and capacity-building initiatives. Building on these efforts, the FGS has submitted to Parliament a draft Expenditure bill to establish the tax instruments, which will Though FGS public spending has expanded be governed by federal law and a draft bill on tax significantly, driven by year-on-year increases in administration. Once enacted, the revenue laws are revenue, spending priorities are largely unchanged. expected to help bring in more revenue. Recurrent spending accounts for almost all of FGS spending, reflecting the pressing need to rebuild External grants to the FGS fell in 2018 but state institutions; public investment spending has were still above the annual average since 2013 of generally been 0.1–0.2 percent of GDP (Table 1.2). 13 This section discusses only grants channeled through the FGS budget. One should recall from Table 1.1 that total donor assistance remained quite high in 2018 compared to historical levels, but that only a small share of these inflows were managed by the FGS. 14 Only $30 million of this grant was spent in 2017. The balance was held in an offshore account as a cash reserve, which was partially drawn down in 2018. August 2 0 1 9 | Edition No. 4 7 Recent Economic Developments Figure 1.8: FGS expenditures have grown but composition has not changed, percent of GDP a. Total Expenditure 7.0 b. Composition of Expenditure 7.0 6.0 6.0 5.0 5.0 Share of GDP 4.0 Share of GDP 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 2013 2014 2015 2016 2017 2018 2019* 2013 2014 2015 2016 2017 2018 2019* Employee compensation Use of goods and services Transfers Recurrent Capital Contingency Arrears repayment Source: Staff computations based on FGS MoF data. Note: Data for 2013–18 are actual; data for 2019 are budgeted. Compensation of employees and use of goods Spending is skewed toward security and and services account for almost all FGS spending administration services. Reflecting the continued (Figure 1.8b). A significant share of the wage bill efforts to recover from decades of conflict consists of allowances, mainly to the armed forces, and state fragmentation, for the last five years police, security forces, and members of parliament, administration has averaged 45 percent of total which averaged 57 percent in 2015–18. Security spending and security 36 percent; economic accounts for the highest share of goods and services, spending averaged only 8 percent and social 47 percent in 2018, followed by consulting and services spending 3 percent. professional services at 10 percent, and utilities, bank commissions, training and travel, and fuel at 6 Public debt percent each. Administration and security account Somalia’s external public debt in 2018 was an for almost all spending on goods and services, 94 estimated $4.7 billion, equivalent to about 99.5 percent in 2015–18. percent of GDP. Debt Management Unit (DMU) records show arrears on principal and interest FGS transfers to subnational jurisdictions have account for 96 percent of this debt16; just over been rising. In 2018, they were 0.6 percent of half is owed to Paris Club members, followed by GDP—up slightly from 0.5 percent in 2017, but more multilateral institutions (Figure 1.9). Arrears to IFIs than triple their value in 2012–16. These transfers have discouraged their financial assistance in the make an important contribution to state activities short run and their full reengagement with Somalia. and help to promote national unity. Somalia’s participation in the Highly-Indebted Poor Countries Initiative (HIPC) could relieve the debt Lack of capital spending continues to stifle potential burden, help restore public debt sustainability, and growth. The lack of fiscal space to fund public unlock resources to support poverty reduction. investment projects has severely limited Somalia’s However, for that to happen, the country will need capacity to invest in its dilapidated infrastructure to (1) demonstrate at least six months satisfactory to enhance transportation, water supply and performance in an Upper Credit Tranche-quality electricity—services important for both growth and IMF Staff-Monitored Program; (2) adopt at least an the well-being of the population.15 interim poverty reduction strategy; and (3) clear 15 See World Bank, “Third Somalia Economic Update: Rapid Growth in Mobile Money—Stability or Vulnerability,” August 2018. 16 DMU records show that all principal that is not in arrears is concessional debt owed to the World Bank and African Development Bank. 8 S om a l i a Eco n om i c Update Recent Economic Developments arrears to the IFIs and mobilize adequate financial terrorism (AML/CFT). Efforts to lay the foundation support from its creditors for debt relief.17 for sustainable financial sector development and strengthen compliance with AML/CFT standards are Figure 1.9: External debt by creditor grouping, 2018 underway. CBS is improving its inspection capacity; and regulations to supervise mobile money are almost finalized. On AML/CFT, with IMF assistance Non Paris Club, regulations for the Targeted Financial Sanctions Bill 15% World Bank, 11% have been drafted. Multilateral IMF, 7% Paris Club, donors, 31% The commercial banking system has expanded, and 54% AMF, 6% credit has grown rapidly, though from a low base. AFSED, 4% CBS licensed five new banks at the end of 2018 (one Other multi. 3% a money transfer bureau), doubling the number of licensed banks. In 2015–18, from a low base, total banking sector assets grew by 94 percent, from $194 Source: Staff calculations using DMU debt data. million to $377 million, and annual growth in credit Financial sector supervision is improving and credit to the private sector averaged 53.8 percent. The to the private sector is growing rapidly banking sector is not only sufficiently capitalized, it The CBS is invigorating its supervisory and is very liquid: in 2018 the total loans to assets ratio regulatory capacities. It is working to reestablish was 15 percent and the loans to deposits ratio was the functions of core economic institutions and 50 percent. Financial sector reforms are giving the foster financial development, inclusion, and private sector confidence to increase deposits and stability while strengthening compliance with anti- banks confidence to increase lending as the CBS money laundering and combating the financing of builds up its supervisory capacity. Table 1.3: Selected financial sector indicators show that the financial sector is booming 2015 2016 2017 2018 millions of U.S. dollars Total assets 194.4 234.2 345.0 377.3 Credit to the private sector 45.2 66.1 105.2 149.0 percentages Credit to the private sector Share to total assets 28.2 30.5 39.5 Share to GDP 1.0 1.5 2.0 Year-on-year growth 46.1 59.3 56.0 Total loans to assets 22.0 15.0 14.9 Loans to deposit 37.3 39.4 50.3 Source: IMF, “Somalia: First Review under the SMP,” February 2019. 17 The government intends for National Development Plan 9, which is under preparation and expected to be approved in September 2019, to meet the HIPC poverty reduction strategy requirement. In May 2019, the IMF and the authorities reached agreement on a 15-month Staff-Monitored Program that they expect will be endorsed as an Upper Credit Tranche arrangement by the IMF Board in July. August 2 0 1 9 | Edition No. 4 9 Recent Economic Developments The Somali economy is highly dollarized, including from the effects of the 2016/17 drought, they the mobile money services that are used by about remain small and narrow-based. Somalia’s exports 73 percent of adults. The CBS has not issued any have been severely afflicted by conflict and climatic official Somali shilling banknotes since 1991. Much shocks and by subsequent GCC livestock import of the remaining stock, which is used primarily by bans imposed to contain trans-boundary livestock the poor, is counterfeit or of very poor quality. This diseases. The high imports have been covered by undermines the financial access of the substantial remittances, estimated at about 29 percent of GDP, proportion of the Somali population who are mainly and official grants, estimated at about 37 percent. poor and nomadic and have no access to U.S. dollars or other foreign currencies. It also inhibits any form The current account deficit (CAD) declined slightly, of monetary policy since the CBS has no control from 9.0 percent of GDP in 2017 to 8.3 percent. At of the money supply. Cash-based humanitarian 8.6 percent of GDP, foreign direct investment (FDI) interventions are also dollarized. These cash and more than financed the CAD. To ensure external mobile money transfers operate in an environment sustainability over the long term, Somalia will need where regulation is minimal. to reduce its high dependence on remittances and official grants—especially official grants—and Remittances and official grants finance the large increase its exports and FDI flows. trade deficit. Somalia typically runs large trade deficits, which 1.2 Medium-term Outlook, Risks, and are financed by remittance and grant inflows Challenges (Table 1.1). In 2018, exports of goods and services accounted for just 26 percent of GDP, with goods Real GDP is projected to pick up modestly over the exports consisting mostly of livestock exports to medium term Gulf Cooperation Council (GCC) countries. Imports Real GDP growth is projected to pick up to 3.0–3.5 of goods and services, on the other hand, remained percent over the medium term. The outlook is high, accounting for about 100 percent of GDP, and predicated on maintenance and extension of the consisting mostly of food and industrial goods. While security gains achieved so far, improvements in exports are estimated to have modestly rebounded weather and thus agricultural production, continued Box 1.1: Currency reform in Somalia Currency reform is now a government priority. The government intends to introduce secure and legitimate small-denomination currency notes as a basis for monetary policy; and simultaneously promote financial inclusion and the development of a Somali shilling payment system. Currency reform will require intensifying central bank governance, banking supervision, and payment reforms and replacing counterfeit notes with legitimate currency. Making it possible to transact mobile money in Somali shillings would extend access to the poor, allow conversion between physical and mobile money, and formalize savings, particularly for poor households. Currency reform would have two phases. The first would seek to replace damaged or counterfeit bills with new Somali shillings of less than a dollar in value. The second phase would replace the larger denominations and would be conditional upon the CBS having built up its institutional capacity and developed independent monetary policy instruments and reserve management guidelines. The government has requested World Bank support for the first phase, introducing new, legitimate, small-denomination Somali shilling notes, targeting the poorest who are financially excluded. Source: World Bank 2017a. 10 S om a l i a Eco n om i c Update Recent Economic Developments development partner support to the government, improve security in Mogadishu and working with and improved revenue collection. Consolidation of the FMS to enhance stability across the country, Al peace and security, rising domestic demand (due Shabaab retains the ability to launch deadly strikes mainly to the growing population), remittances, and against the government and African Union Mission official donor inflows are expected to drive growth in Somalia (AMISOM), constraining economic in 2019–21. The projection also assumes that activity and the prospects for FDI and other private agricultural production continues to grow, and that investment. Furthermore, the continued political solid growth continues in transport, construction, tensions between the FGS and FMS could slow or and telecommunications. undermine progress on reforms, especially those linked to fiscal federalism and revenue sharing, Agriculture is expected to rebound slowly, with which could delay HIPC debt relief. adequate rains in the Gu season (April to June 2019) expected to boost crop and livestock production Exogenous shocks—related to both weather and and replenish depleted water resources in parts of commodity prices—add more risks to the outlook. the country that had a below-average 2018 Deyr Weather and climatic shocks could lower agricultural season. Due to differences in rainfall and in access to output (both crops and livestock), exacerbate water and the quality of land across Somalia, outcomes are stress, and increase Somalia’s humanitarian needs. expected to differ by population group. Food security Higher oil prices could hurt Somalia’s economic outcomes are thus likely to depend on rainfall and prospects by increasing its import bill and worsening how it affects crops and livestock. Rapid and well- its already precarious external balance. coordinated humanitarian responses will be critical in preventing adverse food security outcomes if Certainly, a severe risk to the outlook is political and another weather shock hits. policy uncertainty. The economic reforms to unlock inclusive growth may be delayed because of political The fiscal position is expected to continue to contestation, mistrust between political leaders, and improve as revenue mobilization and public fragmentation at different levels of government— expenditure discipline are reinforced. Domestic each of which could undermine reforms. Moreover, revenues are expected to increase to about 4.3 institutional capacity to carry out reforms and percent of GDP by 2020, and donor grants to remain ensure compliance is far from certain. These risks— steady. This is expected to facilitate a gradual increase many of which are cyclical, but with varying degrees in spending, which will offer Somalia opportunities of severity—can erode gains, and at worst can to increase public investment in infrastructure destabilize Somalia’s fragile political settlement. A and social services like health, education, and slowdown on reform could then delay normalization social protection—investments that are critical to of Somalia’s relations with the IFIs through the HIPC enhanced resilience. CBS financial sector oversight process, which in turn would delay Somalia’s access and regulatory capacity are expected to improve to critical external resources for development. gradually, with financial intermediation deepening to support higher growth over the medium term. Major challenges remain Maintaining reform momentum will be essential. But the downside risks are substantial Although, as noted, Somalia has been building a Over the medium term, economic activity is likely strong track record of economic policy reform. to continue to be exposed to significant risks related Nevertheless, the country continues to face to insecurity in Mogadishu and southern Somalia. major challenges in rebuilding the capacity for Although the FGS is reforming its security forces to macroeconomic management. August 2 0 1 9 | Edition No. 4 11 Recent Economic Developments Revenue mobilization: Somalia must further an in-depth look at education in Somalia and offers strengthen revenue collections through more policy options for improving the sector. efficient customs operations and collections; enacting the two revenue bills; and expanding Somalia’s health indicators are among the worst the tax base through continued progress in the world. Most are below low-income country between FGS and FMS on intergovernmental averages and the country has one of the world’s fiscal relations and revenue assignments. highest levels of child malnutrition. In 2015 the mortality rate for children under 5 years was an Expenditure policy: Here what is required is estimated 137 per 1,000 live births and maternal better expenditure control and fiscal discipline; mortality 732 per 100,000 live births.18 Over 90 and creating fiscal space for, and gradually percent of births take place in the home and reorienting growing spending, to encourage only 33 percent are attended by a skilled birth investment, especially in infrastructure and attendant. Improved water and sanitation are health, education, and other social services. also critical for health, school performance, and productivity, but 50 percent of households lack Monetary policy and the financial sector: The access to improved sanitation, and 20 percent CBS needs to enhance its institutional capacity have no improved water source.19 to conduct monetary policy; build up the supervisory and regulatory capacity of the central Somali households are quite vulnerable to shocks. bank, including for mobile money and AML/CFT; Natural disasters, conflict, and displacement affect gradually restore lost correspondent banking large fractions of the population. Shocks contribute relationships; and reform the currency. to extreme poverty and vulnerability, depressing economic opportunities and livelihoods, damaging 1.3 The Road Ahead assets, and limiting access to farms, fishing, and pastoralist routes. The persistent cycle of shocks Social outcomes are inadequate heightens the vulnerability of Somalis to future Education access and learning outcomes are shocks because there is little public or private low. Only half of the population is literate, and in insurance. The threat of climate change also virtually all age-groups women have less educational exacerbates the risk of displacement by reducing the attainment than men. Only about 33 percent of viability of household livelihoods. Social safety nets children aged 6–13 are enrolled in primary school— to cushion households against shocks are limited, very low by international comparisons and less than fragmented, and underfunded. half the 74 percent average of low-income countries in Sub-Saharan Africa (SSA). Rural residents, IDPs in Continued structural reforms will be critical to settlements, and nomads have significantly fewer sustain growth educational opportunities. The share of rural Somalia’s economy is recovering, but determined residents without formal education is 1.6 times efforts are still necessary to secure economic higher than that of urban residents and the shares resilience and reduce poverty. Since 2017, growth are 2.5 times higher for nomads and 2.6 times has rebounded, inflation has slowed, and the higher for IDPs. Limited access, lack of qualified trade deficit has narrowed. The exchange rate teachers, poor school infrastructure, and general has held steady. But further efforts are needed to insecurity are some of the major challenges for improve economic conditions, increase growth and education. Part 2 of this edition of the SEU takes employment, and significantly reduce poverty. In the World Bank, World Development Indicators. 18 World Bank, “Somali Poverty and Vulnerability Assessment: Findings for Wave 2 of the Somali High Frequency Survey,” July 2019. 19 12 S om a l i a Eco n om i c Update Recent Economic Developments near term, the HIPC process presents a unique The special topic in this edition focuses on the opportunity for Somalia to re-engage with the challenges of educating Somalia’s children. The international community, benefit from debt overthrow of the Barre government in 1991 and the relief, and obtain secure access to the external ensuing civil war disrupted normal economic life; resources crucial for financing its long-term destroyed most public facilities, including schools; development needs. and led to the disappearance of many professionals and the collapse of the national government. The Over the medium term, even with better access consequences for education have been dire: Even to external resources, Somalia’s rapid population compared to other fragile countries, Somali today growth, combined with slow economic growth, has among the lowest enrollment rates in the world. presents major problems in terms of providing public As of 2013, net enrollment rates were 17 percent services and creating jobs for an ever-expanding compared, e.g., to 97 percent in the Congo, 76 youthful population, raising concerns for human percent in Yemen, and 73 percent in the Central capital formation, poverty alleviation, and peace African Republic. In 2015/16 the country’s gross and security. According to estimates from United enrollment ratio for primary school was 32 percent, Nations World Population Prospects, Somalia’s and in Galmudug, HirShabelle, Jubbaland and fertility rate is among the highest in SSA and its Southwest States, less than 25 percent of children youth are projected to reach 4 million by 2030 and were enrolled. The next chapter discusses the Somali 7 million by 2050, up from almost 3 million in 2015. education system and the major challenges it faces Too few jobs in the future and too few educational and presents some recommendations to address opportunities for children in the present may cloud these challenges. Somalia’s prospects for reducing poverty and boosting shared prosperity. August 2 0 1 9 | Edition No. 4 13 SPECIAL FOCUS BUILDING EDUCATION TO BOOST HUMAN CAPITAL August 2 0 1 9 | Edition No. 4 15 Special Focus 2. Building Education to Boost Human Capital 2.1 The Case for Investing in Education Figure 2.1 compares Somalia’s performance with in Somalia other countries with low HCI values. Though there is no information available on Somalia’s learning Investing in human capital will be essential if outcomes, it is clear from low participation in basic Somalia is to escape the trap of poverty and violence education that the country needs to be investing and move back onto the path to prosperity. The heavily in educating its children. crucial 40 percent of Somalis who are now aged 6 to 18 need to acquire the knowledge, health, and skills Figure 2.1: HCI and gross enrollment rates to become productive contributors to the country’s 100 economy and thus break the cycle of conflict, 80 exclusion, and vulnerability. Percentage 60 Making education a top priority will be critical for 40 42 32 38 37 37 Somalia to improve its human capital. The Human 20 32 32 29 Capital Index (HCI) developed by the World Bank 0 Niger Sudan Mali Senegal Burkina Faso Guinea Central African Liberia Chad Republic Somalia measures how much human capital a child born Equatorial Guinea today can expect to attain by age 18, given the risks of poor health and poor education prevailing in the country where they live.20 Although as yet Out of school children Gross Enrollment Rate 2013 Human Capital Index there is no HCI value for Somalia, mainly due to lack Source: Based on data from HCI, World Bank and Facing Forward: Schooling for Learning in Africa, World Bank, 2018. of data on education outcomes, comparison with countries already ranked shows that education This special focus assesses the prospects for outcomes would push it far down on the index. improving learning outcomes and school access as Table 2.1 compares Somalia’s performance with the Somali education system grows within a federal SSA and Chad, the lowest scorer on the HCI. On government structure. It provides an overview of health outcomes, Somalia compares well with SSA the Somali education system, the major challenges and Chad, but on education, Somalia trails them it faces, and proposes ways to address these significantly. Gross primary enrollment in Chad is challenges as the country and its partners consider close to 100 percent; in Somalia it is just 30 percent. stepping up investments in education as part of a Table 2.1: Human Capital Index: Chad, Somalia and Sub-Saharan Africa Somalia Chad SSA HCI Component 1: Survival Probability of Survival to Age 5 0.868 0.858 0.934 HCI Component 2: School Expected Years of School n/a 5.2 8.1 Harmonized Test Scores n/a 403 374 HCI Component 3: Health Survival Rate from Age 15–60 0.7 0.629 0.732 Fraction of Children Under 5 Not Stunted 0.747 0.613 0.684 Human Capital Index (HCI) 0.3 0.4 Source: Compiled from World Bank Human Capital Index, 2018. 20 The HCI is part of the World Bank Human Capital Project and ranks countries according to the expected human development outcomes of their children and youth. 16 S om a l i a Eco n om i c Update Special Focus wider approach to human capital development. attainment was substantial. The overthrow of the Section 2.2 provides the most recent data available Barre government in 1991 and the ensuing civil on education outcomes and outputs. Section 2.3 sets war not only disrupted normal economic life but out service delivery issues, and Section 2.4 proposes destroyed most public facilities, many of them investments that could substantially rebuild the schools; many professionals disappeared; and the system within 4-6-years. national government collapsed. By 1994, school enrollment had hit bottom, with most if not all 2.2 The Education Landscape in schools destroyed, materials unavailable, and both Somalia teachers and students abandoning education. Somalia’s education system has evolved through At present, Somalia’s school enrollment rates are political and social upheaval. In the 1970s and 1980s, among the lowest in the world. In 2013, its net under General Siad Barre, the country was a centrally enrollment rates were 17 percent, compared with controlled “scientific socialist” state whose goal was 97 percent in the Congo, 76 percent in Yemen, and to eradicate clan conflict and ignorance through mass 73 percent in the Central African Republic. Figure education. The Somali language (Af Soomaali) was 2.2 compares education outcomes among the most made the official language of business and education delayed group of countries in SSA (Panel a) and in and a mass literacy campaign was launched to teach areas within Somalia (Panel b). every Somali how to read and write. Textbooks and curriculum were designed to reflect the values and Data from the United Nations Population Fund ideals of the Somali society. For the first time in (UNFPA) suggest that the number of out-of-school the country’s history, students throughout Somalia children and youth (aged 6–18) is 3 million, most were taught in the same language, using the same of them in states in the less wealthy and secure textbooks; during this time progress in educational southern and central parts of the country.22 Some Figure 2.2: Somalia enrollment rates in comparative perspective a. Across other African countries b. Within Somalia 120 Millions 100 0.0 1.0 80 60 Somalia 40 Somaliland 20 0 Puntland CAR Mali Chad Niger Sudan Eritrea Liberia Guinea Senegal Somalia Eq Guinea Burkina Faso Central South Out of school children Gross Enrollment Rate 2000 Gross Enrollment Rate 2013 Population of School Age (2015) Enrollment (2015-16) Source: Analysis of United Nations Educational, Scientific and Cultural Organization Institute of Statistics data, Multiple Indicator Cluster Surveys and Living Standards Measurement Surveys. Somalia data based on data from UNFPA Population data 2014 and Federal Government of Somalia Education Statistics Yearbook 2015/16. Note: All Gross Enrollment Rates are standardized to a 6-year duration in primary education with the exception of Somalia which uses a national definition of primary based on 8 years. The improvements in Somalia GER are measured from a base of 1985 to 2015/16 compared to 2000 to 2013 for the other countries. 21 Unless otherwise noted, data for this chapter is drawn from the Federal Government of Somalia Ministry of Education, Culture and Higher Education, Education Sector Strategic Plan (ESSP) 2018–2020. 22 Somalia Education Cluster Annual Report 2016 (January 2017), Relief Web, https://reliefweb.int/report/somalia/somalia-education-cluster-annual-report-2016- january-2017 August 2 0 1 9 | Edition No. 4 17 Special Focus 60 percent of primary school-aged children are out and Galmudug, only 7.4 percent of primary students of school23 and the percentage at the secondary level are in government schools with the rest in private is even higher. Indeed, for Banadir and the four FMS, or community schools. At the secondary level, EMIS data suggests that about 92 percent of young nearly 70 percent of students are in nongovernment people within the official age range for secondary schools: in Banadir and the Federal Member States school are not enrolled. of Galmudug, HirShabelle, Southwest and Jubaland, only 8 percent of students are in government During the long period of conflict, and in the absence schools with the rest in private or community of state provision and oversight, an assortment of schools. In Somaliland and Puntland, just over 50 nonstate actors emerged to help fill the access gap percent are enrolled in government schools. in Somalia. Table 2.2 describes the different types of providers currently in place and Figure 2.3 shows Rural children have far fewer educational their distribution. The share of students enrolled in opportunities. The education system does not government-managed primary schools throughout cater to the lifestyle needs of rural and pastoralist Somalia is 47.9 percent. In Somaliland and Puntland communities, which constitute 60 percent of the most schools are public. However, in Banadir and population. The absence of school feeding programs the four FMS of Jubaland, Southwest, HirShabelle in famine and drought zones affects the nutrition Table 2.2: Different types of education service providers in Somalia by management School type Description Schools managed exclusively by the government, as represented by the MoECHE or Government schools the state-level MoE. Schools managed by the government in cooperation with a non-state actor. Mixed-management schools Non-state actors include local community, religious groups, (I)NGOs, umbrella associations or private individuals. Umbrella schools Schools managed exclusively by an umbrella association. Schools managed by a non-state actor other than an umbrella association. Non-state Independent schools actors include local community, religious groups, (I)NGOs or private individuals. Source: Altai Consulting Report, 2018. Figure 2.3: Distribution of schools by management type Government (n=25) Mixed management (n=17) Umbrella (n=61) Independent (n=67) 91 Percentage 60 59 35 35 33 29 23 10 8 6 7 3 Bosasso Garowe Kismayo Mogadishu Source: Altai Consulting Report, 2018. Notes: Based on a survey sample 170 of primary and secondary schools operating in urban and peri-urban areas across four locations: Bosasso and Garowe in Puntland; Kismayo in Jubaland, and Mogadishu in Banadir. 23 Education Sector Strategic Plan (ESSP), p. 67. 18 S om a l i a Eco n om i c Update Special Focus as well as school attendance and retention of the and Belet Xaawo (circa 85,000). In addition to IDPs poorest children. The extent of the discrepancy at within Somalia, there is a large group outside (e.g., the primary level is nearly 2 to 1: in urban areas in Dadaab, Kenya), who, if repatriated will increase 65 percent of primary-age students are in school; this already large population. Enrollment of IDPs at in rural areas, only 35 percent are enrolled. The both the primary and secondary school levels is far imbalance between secondary urban and rural below national averages for Somalia and depress enrollment is even greater—only 5.5 percent of all progress on these key development indicators secondary students are in rural areas, and in Banadir for the country as a whole. For IDP children older and the FMS, only 1.3 percent live in rural areas. than 6, 24.2 percent are enrolled in education— This has important implications for student success nearly 12 percent less than the national average. since, for Somalia overall, school survival rates are The primary GER for IDP children is roughly half the more than 22 percent higher in urban (70.8 percent) national average, and only 12 percent are enrolled in than in rural areas (47.9 percent). This discrepancy secondary school.25 (see Figure 2.4) points to significant inequities in the distribution of educational resources (e.g., schools, Since education depends heavily on fee-paying teachers, learning materials, water facilities). schools, poor students are at a distinct disadvantage. The limited availability of public schools handicaps Formal schooling systems have largely neglected those who cannot afford private fees. Often private Internally Displaced Persons (IDPs). As of April schools are not even an option since operators do not 2019, about 2.6 million IDPs were spread across run schools in poor and disadvantaged areas. Over over 2,000 locations in 60 districts of Somalia.24 69 percent of the Somali population live in poverty, About 1.1 million are in protracted displacement, which has resulted in highly unequal access rates and 1.5 million were displaced after November for the disadvantaged, who are served by neither 2016 because of drought, conflict, and flooding. state nor nonstate schools.26 Notably, households Most IDPs immigrate from rural to urban areas in the bottom 40 percent that receive international to seek jobs or assistance. The main IDP hubs are diaspora remittances have substantially higher Baidoa (circa 325,000), Mogadishu (circa 175,000), school enrollment than non- recipients. Figure 2.4: Primary (incl. IQS) and secondary enrollment by location Primary Secondary Somalia Somalia Somaliland Somaliland Puntland Puntland Banadir and FMS Banadir and FMS 0 20 40 60 80 0 20 40 60 80 100 Rural Urban Rural Urban Source: ESSP, p. 55 - weighted figures, urban / rural ratio derived from UNFPA Population Estimation Survey (PESS). Notes: IQS are Integrated Quranic Schools. 24 Total identified in the Camp Coordination and Camp Management (CCCM) Cluster Somalia April 2019 Status Report. The CCCM cluster is supported by the Somalia Humanitarian Fund, German Human Assistance, European Union, USAID and DFID. 25 ESSP, p. 32. 26 World Bank, “Somalia Poverty and Vulnerability Assessment: Findings from Wave 2 of the High Frequency Survey,” July 2019 (forthcoming). August 2 0 1 9 | Edition No. 4 19 Special Focus Girls’ participation and survival rates trail far Nationally the survival rate was 64 percent (66 behind those for boys (Figure 2.5). Critical barriers percent boys, 62 percent girls); Somaliland had to girls achieving equity in education are social the highest rate at 71 percent (72.7 percent pressures for early marriage, expectations that girls boys, 68.8 percent girls), followed by Banadir support households and rear younger siblings, and a and FMS27 at 65 percent (67.4 percent boys, 62.1 perception of greater social value in boys accessing percent girls), with Puntland at the bottom at 56 education rather than girls. Risks of gender-based percent (57.4 percent boys, 54.2 percent girls). violence in and around schools also create barriers. Neighboring Kenya has a national survival rate of The Gender Parity Index (GPI) for primary school in 93 percent. Several factors are commonly cited Banadir, the four FMS, Puntland, and Somaliland for low survival rates, ranging from economic ranges from .72 to .79; the secondary GPI is even barriers to participation and difficulty with access lower, from .53 to .66. to facilities. Rural and urban survival rates also vary significantly: they are more than 22 percent Across Somalia, there are significant differences in higher in urban areas (70.8 percent) than in rural primary school survival rates to grade 5 (Figure 2.6). (47.9 percent). Figure 2.5: Primary and secondary enrollment by region and gender Primary (%) Secondary (%) Somalia Total Somaliland Somaliland Puntland Puntland Banadir and FMS Banadir and FMS 0 20 40 60 80 0 20 40 60 80 Male Female Female Male Source: PESS, EMIS. Notes: Weighted averages of PESS and EMIS. Figure 2.6: Survival rate to grade 5 (%) 120 100 80 60 40 20 0 Jubaland Southwest Hirshabelle Galmudug Banadir Puntland Somaliland Somalia Male Female Total Source: Derived from PESS. Notes: Total enrollment using weighted figures, upper/lower ratio derived from PESS. 27 FMS refers to HirShabelle, Galmudug, South West and Jubbaland. 20 S om a l i a Eco n om i c Update Special Focus Low adult literacy rates in Somalia indicate that Figure 2.8: Examination pass rates for Banadir and FMS - Grade 8 and Form 4 exams performance of the system has been poor for generations. The disadvantaged suffer most. Adult 98% Grade 8 91% 92% literacy rates are lowest among nomads/ pastoralist, 100 81% 85% rural communities; and IDPs; they are highest in Form 4 urban areas (Figure 2.7). However, even in urban 87% Percent areas, literacy rates are much higher for those from 67% 50 the richest wealth quintiles compared to those from poorest wealth quintiles. By state, adult literacy rates 30% are lowest in Banadir and the four FMS, where only 38.3 percent of Somalis are literate. This is lower 0 2012 2013 2014 2015 2016 than Somaliland, where 45.3 percent of adults are Grade 8 Form 4 literate, and in Puntland with 42.9 percent. Source: ESSP. Learning Outcomes assessed demonstrated significant improvement in Indicative learning outcomes have seen some reading for both boys and girls.28 Students in Grade improvement. Results for the primary school leaving 2 had a mean score of 42 correct words per minute exam (Grade 8) and Form 4 exam (for entrance (cwpm) by 2015, more than double the 2013 score of to university) for Banadir and FMS show some 16 cwpm. Scores grew significantly between grades improvement between 2012 and 2016, though these as students progressed through the education results must be viewed as indicative, because they system. By 2015 scores for grade 4 students reached may be related to a change in criteria (Figure 2.8). a mean of 64 cwpm, up from 51 cwpm in 2013. This success is attributed to new foundational literacy An Early Grade Reading Assessment (EGRA) in FGS teaching methods and materials, rolled out through schools in Mogadishu showed positive learning teacher training and in-classroom mentoring. Also outcomes.27 In 2013–15, MoECHE schools in contributing to this program’s success was the Mogadishu participated in an EGRA assessment focus on learning in the students’ mother tongue. administered by Concern Worldwide. The schools Moreover, the early grade gender disparities visible Figure 2.7: Literacy by age, gender and location 65 100 60 90 % of population aged 15+ % of population literate 55 80 50 70 45 60 40 50 35 40 30 30 25 20 20 10 10 - 14 6-9 55+ 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 0 Mogadishu Other urban Rural IDPs in Nomads Age group settlements Overall average Women Men Overall average Source: Based on High Frequency Survey Wave 2 data. 27 Concern Worldwide. FINDING WORDS: A further analysis of Early Grade Reading Assessments in vulnerable communities, (https://www.concern.net/sites/default/ files/resource/2017/02/finding_words_.pdf) 28 Protracted conflict over the period studied (2013 and 2015) restricted some assessments to schools located in Mogadishu with access to rural schools in Lower Shebelle highly restricted. Therefore assessments are only representative of the children in attendance in school on the days the assessments took place. August 2 0 1 9 | Edition No. 4 21 Special Focus in Somalia’s 2013 assessment had disappeared by conducted for a cross-section (5 percent) of seventh- the time of the endline assessment. In 2015 there grade students in Banadir and FMS, Puntland, and was no difference in the scores of boys and girls— Somaliland. The MLA has not been repeated. In the the mean for both was 54 cwpm, compared to the MLA states in Central and South Somalia performed 2013 scores of 26 cwpm for girls and 31 cwpm for much better than in the educationally advanced boys baseline. To achieve this, the program focused states of Somaliland and Puntland (Figure 2.10). on enrollment and retention campaigns for girls (see Education in the former is predominantly provided Figure 2.9). by privately managed schools. Also, given low access in these states, only those in the highest wealth A Minimum Learning Assessment (MLA) conducted quintiles attend school, which may also contribute by MoECHE in 2012 showed better learning to the better MLA performance of these schools. A outcomes for Banadir and FMS, which perform repeat assessment could validate the earlier findings poorly on other education indicators. The MLA was and support more analysis Figure 2.9: Early Grade Reading Assessment results in FGS schools, 2013–15 70 70 64 60 57 60 53 54 54 54 51 Correct words per minute Correct words per minute 50 50 42 42 40 40 32 31 30 29 30 26 22 20 16 20 10 10 0 0 Grade 2 Grade 3 Grade 4 Male Female Total 2014 2013 2015 2013 2015 Source: Concern Worldwide. Finding Words: A further analysis of Early Grade Reading Assessments in vulnerable communities. Figure 2.10: Percentage of students that score 60%+ in Grade 7 Minimum Learning Assessment (MLA) by states and subjects, 2012 89 80 75 59 Percentage 32 22 15 9 <1% Banadir and Fms Somaliland Puntland English Somali Numeracy Source: MLA report, 2012. 22 S om a l i a Eco n om i c Update Special Focus 2.3 Service Delivery Challenges The distribution of teachers between rural and urban areas is inequitable, particularly in the central School Infrastructure southern states, where 86 percent of all primary The draft Constitution of Somalia and draft National school teachers are in urban areas compared to only Education Policy state that free and compulsory 13.5 percent of teachers recorded in government education is the right of every child; however, EMIS. This is clearly a misallocation given the the inability to ensure access with acceptable population distribution, with 51.7 percent rural and infrastructure is a significant problem for Somalia. nomads and 48.3 percent urban and IDPs.29 Because the civil war destroyed more than 75 percent of existing schools, the school system has to be In most of the country, teachers are not paid rebuilt from the ground up. The schools that survived by public funds, which reduces top-down are not in good shape; for example, in Banadir and accountability within the system and the space for FMS, the majority of schools, 55.9 percent across all effective teacher management. In Banadir and FMS, types of infrastructure, are rated in ‘poor’ condition, government funds just 8 percent of teachers. The 40.7 percent in ‘fair’ condition, and only 3.4 percent fact that teacher payments and incentives are largely in ‘good’ condition. To accommodate more students dependent on a variety of agencies and international many schools operate double shifts. Because so NGOs (INGOs) has undermined the development of many schools were destroyed, a large number of integrated civil servant pay schemes with consistent private schools also cropped up to meet demand. pay levels, further undermining the coherence of MoECHE is embarking on a needs assessment for the education sector and the sustainability of pay 2018–20 to prioritize construction of new school schemes. By contrast, in Somaliland the government buildings in underserved areas where demand for is responsible for 66 percent of salaries and education is high. coordinates the training delivered by universities within its borders. Teachers The teaching force is largely uncertified and Administration in a federal structure predominantly male. Only 37.9 percent of primary Though not fully codified in law, the federal teachers across all Somalia are qualified; the fewest Ministry of Education, Culture and Higher number qualified are in Banadir and FMS (20.8 Education (MoECHE) is responsible for guidance percent). The government estimates that only and the administration of education in Somalia. The 34.4 percent of secondary teachers are qualified; Ministries of Education (MoEs) in the Federal Member the proportion of certified teachers is highest in States of HirShabelle, Galmudug, Southwest, and Somaliland at 55 percent, followed by Puntland Jubaland and the Federal Government MoECHE at 35.6 percent certified, and Banadir and FMS have agreed in a Memorandum of Understanding at only 21.1 percent. Of particular concern is the (MoU) to work cooperatively in all matters related predominance of male teachers: 91.8 percent of to education and agreed upon the responsibilities primary teachers and 97 percent of secondary of each jurisdiction.30 The MoECHE is mandated teachers are male. Somali National University has to draft regulations such as Education Acts, set played a central role in training and certification policies, and provide coordination. The FMSs are of teachers, paid for by donors/NGOs but without mandated to implement education programs and government coordination. policies. At this time, the four FMS have their own state laws and policies and Puntland and Somaliland also have established their own MoEs, supported by laws, policies, and education sector plans. ESA, p. 125. 29 National Education Conference Declaration, Unesco media, http://www.unesco.org/new/fileadmin/MULTIMEDIA/HQ/ED/pdf/NEC-declaration.pdf 30 August 2 0 1 9 | Edition No. 4 23 Special Focus As a consequence of the collapse of the Somali education, but their capacity is severely limited, state and the political and security challenges as are infrastructure, materials, and salaries. of reconstruction, capacity at all levels of REOs and DEOs must also deal with significant administration is inadequate. of travel, security, and authority issues. • At the FGS level, the MoECHE administrative structure was established only a few years ago, There are two distinct educational cycles in starting virtually from scratch, and capacity Somalia, one in public schools and the other in within the ministry is still low in terms of staffing, non-state schools (Figure 2.11). Private institutions skills, and training. Infrastructure to support mainly use the 9-3 system and public schools the the organizational capacity of the MoECHE 8-4 system. The discrepancy illustrates some of the (offices, vehicles, computers, and logistics) is difficulties for the Ministry, which currently has also limited. Less than 1 percent of all MoECHE little control over a relatively large nonstate sector. personnel (teachers, ministry officials and other The new national curriculum that the MoECHE ministry staff) are paid from the government is disseminating is intended to bring consistency budget. Minimal transparency, accountability, to the system by requiring 12 years of mandatory and financial utilization capacities undermine the education (4 lower primary, 4 upper primary, and 4 ability of the MoECHE to absorb funds and deliver secondary level). activities. Due to inherent system and staffing weaknesses, it relies (like many other ministries) Curriculum and Materials on additional support financed externally. A new National Education Curriculum Framework • According to the MoU, the FMSs are mandated is being phased in. The government has launched to implement education programs and policies, a multiyear effort to develop a new national but they also suffer from inadequate capacity. competency-based curriculum to be delivered Few resources flow from FGS to the states’ MoEs. through progressive learning styles based on • Regional and District Education Officers (REOs current research on how children learn. MoECHE and DEOs) find it difficult to coordinate and has finalized the curriculum for grades 1 to 4 monitor delivery of education services. Of the 58 and in August 2018 distributed textbooks to districts across Banadir and the four FMS, very elementary students. The intermediate curriculum few have functioning governance structures. is also complete, and the plan is to use the new Districts are supposed to oversee primary curriculum in the 2019/20 academic year. For Figure 2.11: Two distinct systems of education cycles in Somalia: public and private ECE Primary Secondary Grade Grade Grade Grade Grade Grade Grade Grade Form Form Form Form Public 1 2 3 4 5 6 7 8 I II III IV Private 1 2 3 4 5 6 7 8 9 10 11 12 Arabic Ages 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Source: Constructed from Federal Government of Somalia Draft National Policy of Education 2015-30. 24 S om a l i a Eco n om i c Update Special Focus secondary students, Grades 9–12, there is a unified implemented on a minimal budget. There has been syllabus which has been used by schools in Banadir, progress in establishing an annual school census, Jubaland, Southwest, Galmudug, and Hirshabelle particularly in terms of coverage. The current system since 2014. Since 2015, this has enabled the federal involves visits to schools in accessible areas by trained government to organize national examinations for data collectors supervised by regional personnel and students leaving secondary school. The MoECHE the cost is high (about $66 per school surveyed). The plans to launch the national secondary curriculum data are now published in the MoECHE annual report by 2020.31 Because of the large number of nonstate of education statistics. Using EMIS is complicated schools, ensuring its use across the country will not by insufficient FMS capacity; issues related to the be easy. paper-based data collection approach and issues of data quality, verification, and ambiguity; lack of links Crucially, the new curriculum also introduces a to teacher registration and examination databases; consistent use of languages. In primary school this lack of feedback to states, regions, and districts; and will be Somali; Arabic and English will be used in technical issues with the software. secondary school, which could have a positive impact on textbook production and the examination system. Accountability, Quality Assurance, and School Supervision Assessment and Examination Systems Systematic monitoring of delivery of education A significant number of students, many of them services is lacking. Though MoECHE has attempted from private schools, do not participate in to standardize efforts through its Department of assessments of student learning. The MoECHE Quality Assurance, regions use a patchwork of quality has established examinations for Grade 8 (primary assurance approaches. REOs, DEOs, and Quality school-leaving exam) and Form 4 (university Assurance Officers are responsible for monitoring entrance exam), managed by a Department of FMS schools using the MoECHE Comprehensive Examinations and overseen by an autonomous Quality Assurance Checklist for Schools. However, National Examination Board. In 2015, only 3,400 the structures described in the School Inspection took the Form 4 exam; by 2018, 32,000 secondary and Improvement Manual are nascent and school students across FMS and Banadir sat for it. For Grade supervisor positions may not yet exist. Further, there 8, the 43,000 exam takers in 2018 were 7,000 more is not much information available on the number than in 2017. However, Puntland and Somaliland of school quality assurance inspections conducted do not currently take part in the government- because inspection report data are not integrated administered exams since each has its own, which into the EMIS. The resources available to regional prohibits state comparisons. Further, most nonstate and district officers are also so low as to limit their schools undertake their own testing which, since ability to systematically supervise schools. they enroll the most students, undermines the effectiveness and utility of the assessments. The difficulty of assuring quality is exacerbated by the large number of private and informal schools. Monitoring the delivery of schooling (EMIS) In the absence of meaningful government funding Education Management Information System (EMIS) for education, School Management Committees and activities depend on external donor support and Community Education Committees have become for the past few years have on the whole been important in school monitoring and accountability. Somali Public Agenda “Examining public schools in Mogadishu,” Governance Brief 02, April 2019. 31 August 2 0 1 9 | Edition No. 4 25 Special Focus Planning and Financing of Education payment of technical advisors.33 There is off-budget Somalia has little national revenue, and what is support to education across Somalia (see Figure available is often prioritized away from education, 2.12), and a wide range of development partners, which accounts for less than 2 percent of total such as the World Bank, UN agencies, traditional government spending. This is far below the 20 bi-laterals, non-traditional donors and foundations, percent recommended by the GPE, what neighboring and groups focused on humanitarian response and countries spend, and the 7 percent allocated by the education in emergencies.34 With such a diverse government of Somaliland. However, Government group of development partners, it is difficult for the revenue has increased in recent years and the MoECHE to coordinate and report on off-budget National Development Plan 8: 2017–19 commits to support, which is far from easy to quantify. increasing the budget allocation for education by 3 percent annually. Looking ahead, it is expected the Figure 2.12: Project disbursements by location in education, health, WASH, 2016–18 National Development Plan 9 will target further 100 increases in social spending. 90 80 70 Education planning is complicated by insufficient 60 and unreliable financing. MoECHE has in place a $ mln 50 national education sector plan and is supporting 40 development of plans for the FMS. Somaliland 30 20 and Puntland have their own Education Sector 10 Strategic Plans with no specific coordination or 0 harmonization. The current budget allocation, S r ug lle nd nd t nd ed es di FG be ud ut la la ila na hw ba nt rib ha al lm Ba ut Pu m Ju however, is insufficient to support core functions rs att Ga So So Hi Un Education Health WASH of an effective public education system that include Source: Aid Flows in Somalia, 2018. pp29. payment for teachers and school construction. Notes: Disbursement for 2016-18 combined; Water and Sanitation (WASH) The large number of donors and unreliable donor Security budget support has created a complicated aid Conflict in states in the southern and central parts environment.32 Education finance is supported by of the country has serious impact on enrollment donors and development partners. Though data on levels. There is a clear correlation between the domestic funding for the ministry has improved, degree of security in a region and school enrollments there are no reliable data on outside direct support there. As detailed by Amnesty International, attacks to the budget, but the MoECHE finance department on innocent children and teachers in learning estimates $1.25 million annually in 2015/16. Budget institutions have made parents skeptical about support can be unreliable—donors do not always sending their children to school, where they are meet their full budget commitments, making it vulnerable to abduction and other life-threatening difficult for the MoECHE to plan. Donor and education consequences during raids on schools.35 There is a partner support also take other forms, such as close correlation between the Composite Security training of MoECHE staff, support for important Indicator and levels of enrollment across the regions: meetings such as the Annual Joint Reviews, and Enrollment rates are higher in Somaliland, where the technical support to key ministry functions through security index is higher (48 percent with an index of 32 According to the Ministry of Planning, Investment and Economic Development, there are a startling number of international actors in the country as a whole: at least [[???]] 12 bilateral donors, 26 multilaterals, and seven pooled funds. 33 ESSP, p. 157. 34 Federal Government of Somalia, Aid Flows in Somalia: Analysis of Aid Flow Data, March 2018. 35 Somalia: An Overview of Primary and Secondary Education, Journal of Somali Studies, 2014, Mohamed A. Emo, p. 9. 26 S om a l i a Eco n om i c Update Special Focus 44 percent) and lower in HirShabelle, Galmudug, • Successful piloting of an Early Grade Reading Jubaland and South states of Somalia, where the Assessment in Mogadishu in 2013–15. This security index is lower (18 percent primary net pilot demonstrated that EGRA can provide enrollment with an index of 32 percent).36 valuable information about reading tasks, that can be used to improve student performance. 2.4 Rebuilding Somalia’s Education System • Impressive work of Somali communities and nonstate actors in creating educational Despite the many challenges the country faces, it opportunities in the absence of government has made notable recent progress in education that action. The role of private and partnership can serve as the foundation for accelerating progress schools is a testament to the willingness of towards creating access to quality education to nonstate sector to fill the education vacuum. Somalia’s children, such as: • A diaspora that is investing in education • Phasing in a Somali-owned and -prepared for the children of Somalia. Somalis abroad curriculum framework. Ultimately, this provide substantial funding to their family national curriculum will be adopted in all and friends to support children in schools, schools, both public and private. including opening and operating nonstate • Introducing a consistent language of schools. instruction. Stakeholders in all jurisdictions have agreed that Somali is to be the language It is urgent that Somalia’s leaders build on this of instruction for teaching and learning in all progress to bridge the significant gap between primary schools and Arabic and English will be the vision of an education system in which all of Somalia’s children can learn and the reality of a used in secondary schools. system struggling on multiple fronts. A conceptual • Collecting and reporting education system framework could guide investments in education. data. There has been progress in developing The foundation (Figure 2.13) should consist of two the school census/EMIS, which collects data building blocks: (1) reliable data on the characteristics and reports on the coverage of the school and performance of students, schools, and education system, among other indicators. The data are management entities in order to monitor schooling, now published in the MoECHE annual report education spending, and learning; and (2) sufficient of education statistics. and predictable funding at the federal and member • Expansion of affordable mobile phone and state levels with aligned donor funding to support Internet services. High mobile connectivity system improvement. Good data and sufficient could enable Somalia to leapfrog and more funding are in turn prerequisites for expanding rapidly improve education services built on the provision of quality schooling across Somalia, leveraging the efforts of communities and the private Internet platforms. An added benefit is that sector. Finally, reliable data on schools and students, the technology enables money transfers and especially learning outcomes, and adequate access other banking activities via mobile phones, to quality schooling, are necessary for the design which has advantages for paying teacher and delivery of effective and targeted support to salaries and grants to schools. teachers and learners. The Composite Security Index is a measure provided in the UNDP Human Development Report of 2012 regarding the attainment of physical, mental and spiritual 36 peace and security of individuals and communities at home and in the world. It is defined by weighted calculation of up to 33 indicators for social capital, human, environmental and economic security and measured on a 0-1 scale. August 2 0 1 9 | Edition No. 4 27 Special Focus Figure 2.13: Conceptual framework for rebuilding require consensus between federal and member Somalia’s education system state authorities, demand significant funding and Focus on quality capacity development, and take time to get off the Build governance structure with clear rules and High potential, short term Leverage technology Fundamental quality levels for ground but will provide a stable ecosystem for the responsibilities across FGS and FMS interventions all schools country to be able to invest in building its human Increase access rapidly capital. However, the country cannot afford to build these systems from the bottom up; it would need Mobilize communities in rural Partner with private providers areas in urban areas to leverage its strengths to launch high-potential interventions in the short to medium-term to Sufficient and predictable Reliable and timely FINANCING DATA provide basic education services to its citizens. Building blocks Increase domestic Align donor Strengthen Institutionalize financing financing EMIS learning assessment The following are high-potential, short-term Source: Constructed by authors. interventions that could help put Somalia on a path to rebuilding the education system: Core functions of the education sector need to be operationalized even as allocation 1. Deliver effective teaching and learning to all of responsibilities to the federal and state Increasing access alone will not produce the human governments is being negotiated. Until Somalia’s capital Somalia requires to get on the path to federal and regional leaders and citizens reach prosperity; students will need to acquire through a agreement on the country’s constitutional quality education, the skills to help them become structure and overall governance, the distribution productive members of society. Education can of responsibilities for education will continue also be a powerful basis for promoting unity and a to evolve. In the absence of a legal mandate for Somali identity to break the cycle of violence in the coordination, standard-setting, and service delivery country; that means systems that provide the same between federal and state authorities, the framework learning experiences to all in the country. A single is based on the states ensuring improving service language of instruction, an approved Somali national delivery and a strong stewardship role for the federal curriculum, and affordable mobile connectivity open government, exercised by improving foundational up opportunities to build a system that can leapfrog elements like data and financing and coordinating and provide quality learning opportunities to its efforts to reach agreement on standards with the students, even in the areas of the country that are FMS. This division of responsibility will help ensure hardest to reach. that options for supporting teachers, learners, and schools can be launched quickly in numerous places Use technology and have visible impact across Somalia; meanwhile, The increasing availability of broadband across the options that strengthen the entire system will be country and the increasing interaction of Somalis built to enhance the role of the federal government with online and mobile platforms opens up a in coordination and leadership. tremendous opportunity. Mobile penetration is high and still rising. About 90 percent of Somalis over 16 The priority should be quick gains within a years old have a phone, and 30.8 percent of which framework that promotes longer-term stability. are smartphones.37 Interaction with online platforms Any interventions by federal or member state and tools is also high. For example, of the 1.2 million education authorities should be designed as part of Somalis who are active Internet users, 1.1 million a long-term sector development plan. The plan will were active on Facebook. SomaliREN, a consortium 37 Altai Consulting, “Mobile Money Ecosystem in Somalia,” June 2017. 28 S om a l i a Eco n om i c Update Special Focus that has received support from the World Bank, has areas, is limited by security and cost considerations. been able to connect several universities in Somalia Important considerations in using this approach at low cost. would relate to introducing the new technology to classrooms, production of high-quality local- There is tremendous potential for Somalia to language content, and identifying a technology leverage its high levels of connectivity to provide partner. If successful, this approach could stimulate a low marginal-cost, blended instructional model creation of a mechanism for enhancing the quality that enables personnel (for instance, community of instruction in a highly challenging operational teachers, new and experienced) with training and environment. qualifications to deliver learner-focused education. Technology could be used to provide: (1) a digital Target scarce resources platform for teachers, designed to improve their There is an urgent need to improve learning quality ability to teach at the right level, to systematically in Somalia schools. The government could provide build their qualifications while in service, and financing to schools to achieve an agreed-upon to take advantage of such teaching resources as minimum or fundamental quality of operation. scripted lesson plans based on the curriculum; Because so many are below standard, this approach (2) complementary learning modules that deliver would provide an objective basis for allocating content directly to students to overcome the educational funding to schools where it is most disadvantages of a teaching force that has low needed. content and pedagogical knowledge; and (3) tools to support student assessment and differentiated To establish the quality threshold, it will be learning through adaptive learning. necessary to (1) define conditions based on a participatory audit process, collecting data from A significant benefit of digital platforms is that primary schools on classroom infrastructure and they can be rapidly and remotely enhanced and sanitation, furniture, textbooks, learning materials, refined based on the lessons learned during teacher training, and community engagement to implementation. This approach has shown success determine current school conditions; (2) conduct in bringing disadvantaged students up to grade level surveys and estimates of the costs needed to invest in Haryana, India, where it was introduced in 2015. in each school to bring it up to the fundamental It would also enable students in insecure areas to quality level, and (3) establish a total budget for stay in contact with schools even when security this initiative for a given period of time. Among prevents physical access and would reinforce use conditions to consider at the outset would be the of a single curriculum and learning standards across adequacy of infrastructure and equipment, basic the country. teaching and learning materials, teachers, and child safety factors. This technology-based approach could be rolled out in the short term while the government invests Establishing a fundamental level of quality is a in improving its teacher training institutions to pragmatic way to determine at the outset the produce the required number of qualified teachers minimum levels of service provision necessary, and and later support their continuous development also to provide an information base for calibrating over time. It can also be the vehicle for getting high- the needs of individual schools and monitoring quality teaching and learning resources to teachers their performance over time. It is also an equity- and students at significantly lower cost when enhancing initiative in that priority would be given government’s access to schools, especially in rural to schools where conditions are furthest below August 2 0 1 9 | Edition No. 4 29 Special Focus the fundamental quality level. Once this level is university or teacher training graduates) to set up achieved for every school, the quality threshold primary schools. In this case, the community would: could be moved up so that the quality all schools a. Secure a school site. Communities could could ultimately be raised (Figure 2.14). One way to identify underutilized government buildings, operationalize the provision of funding to schools or members of the community might donate would be through a government-financed school space. In partnership with the community, the improvement fund. This approach has been credited government could help to construct simple with providing a solid foundation for Vietnam’s learning structures. As a requirement, these successful education program and with positive designs should include features that would results in, e.g., Brazil, Nepal, and Benin. facilitate girl’s enrollment, such as boundary Figure 2.14: Prioritizing investments for schools furthest walls and separate latrines. from the Fundamental Quality Level School Quality b. Recruit teachers, especially women. These could be selected based on a test developed by the government to ensure they have basic knowledge and skills, and are committed to teach primary students. The government would provide on-site training and continuing support via technology as well as teaching and learning materials. An incentive would be that the government would pay the teacher salaries. c. Encourage girls to enroll. Provide an environment that would support girls’ enrollment, such Source: Constructed by authors. as recruiting female teachers and school construction that ensures privacy. 2. Partner to increase access rapidly d. Monitor service delivery and quality instruction Addressing in the short and medium term the and ensure security for students and teachers. severe lack of school places that offer basic learning Community partners could submit periodic opportunities, particularly for girls, IDPs, rural/ reports on student learning, teacher attendance, pastoralists and the poorest will require multiple and school conditions using mobile apps, as a mechanisms to enhance public provision. The way to support District Education Officers who government can also work to open new schools are over-burdened and have problems traveling through partnerships with communities and public- to distant locations. private partnerships. Important benefits of government-supported Mobilize communities community schools are that it could bring schools The main reasons for low enrollment in rural into the government database and also increase communities, surveys find, are that schools are not the legitimacy of local government. The community available, they are too far from children’s homes, school approach has been used successfully in or parents have no money to pay school fees. In Pakistan’s Balochistan Province, which has similar rural localities and hard-to-reach areas that have low extreme access-related challenges because of small school coverage, member state governments could communities— almost half of the 22,000 settlements engage with Community Education Committees, have no education facility due to scarce resources, community-based organizations, or other education- conflict, and a generallack of implementation oriented members of the community (such as capacity. In less than four years, community schools 30 S om a l i a Eco n om i c Update Special Focus established in these settlements enrolled more than a. Enhancing the technology infrastructure to 40,000 students. make EMIS more web-based and capable of incorporating real-time data (a system-wide Incentivize entrepreneurs issue). Somalia’s nonstate sector has been resourceful in b. Introducing mobile phone-based data collection helping meet the country’s demand for education. (including 2G mobile SMS) to enable DEOs. REOs, Nonstate schools serve over 50 percent of primary parents, and community members to collect school students and 70 percent of secondary and submit real-time data into the EMIS on students, especially in relatively less-stable areas school conditions, teacher registration, teacher of the country where the public sector has been and student attendance, and the availability unable to operate. Nonetheless, over three million of teaching and learning materials (the basic children are still not in school, with the vast majority indicators of fundamental quality). This could be living below the poverty line. Leveraging the private done through a tool like EduTrac, an innovative sector’s ability to operate in unstable environments mobile system of data collection that UNICEF is by giving private entrepreneurs incentives to open currently supporting in Afghanistan, Zimbabwe, new schools could be the fastest way to begin Peru, and Uganda. closing this massive access gap, especially in urban c. Establishing multiple rounds of sample-based and peri-urban areas, and to target IDPs and other independent verification of EMIS data to gauge communities that have fallen behind. Public-private and improve the reliability of the data and to partnerships could incentivize entrepreneurs to implement corrective measures to increase open new schools in low access localities if the quality and transparency. government paid a per-child-enrolled subsidy. This could help ensure that the national curriculum is d. Defining priority indicators for EMIS, such used, the public sector can regulate the private as international indicator protocols, so that sector, and the government would quickly increase information on the sector is globally comparable its footprint in providing education. and available to decision makers, while ensuring that the system is as streamlined and realistic 3. Strengthen Data for Monitoring and as possible. FMS and FGS will need to agree to Accountability align data collection with these indicators and mechanisms for collecting and reporting data. There is a dearth of routine and reliable data on students, schools, and the entire system. Though Institutionalize learning assessment the progress has been significant, the EMIS does In the short term, the EGRA, which measures the not ensure that collection and reporting of school foundational skills needed to learn to read, could data are fully transparent, reliable, and timely. Nor be used as a quick and reliable method to assess is there a national student assessment system at a range of early reading skills known to be central the early primary level to help teachers, parents, to reading fluently with comprehension. This and policymakers understand what the students are knowledge can inform teachers and administrators, learning and where remedial instruction is needed. providing a basis for interventions to raise learning outcomes. EGRA can also support education officials Upgrade EMIS setting standards and benchmarks for reading, as To build on and further institutionalize the EMIS so well as planning curriculum and teacher training that it can serve as the data foundation for system- to best facilitate children’s reading achievement. wide reform, a number of institutional improvements EGRA can also be used to monitor system progress are needed: and evaluate programs. EGRA has already been August 2 0 1 9 | Edition No. 4 31 Special Focus piloted in Mogadishu and could be expanded to efficiently with Somalia’s objectives of increasing other jurisdictions in a national pilot and then access, equity, and the quality of schooling across institutionalized. Since its inception in 2006, EGRA the country. has been adapted for use in more than 65 countries and in over 100 languages. Despite the differences Ensure adequate financing across Somalia through in instrument development between languages, a National Education Development Fund contexts, and countries, EGRA’s widespread use There is a need to ensure access to quality gives users a shared platform to describe results and schooling for all Somali students by providing more monitor system changes. equitable per student funding. To accomplish this, the MoECHE could require every state to budget and 4. Ensure Sufficient and Coordinated Funding for spend an agreed minimum amount per student in Quality Education its schools; and where this is not sufficient, use a Somalia’s ability to expand schooling and centrally-managed national fund to ‘top up’ state systematically raise educational quality and spending in a transparent and equitable manner learning outcomes depends on an adequate, (Figure 2.15). Because both the states and the predictable, but also growing funding base. This in federal government have very limited revenues, turn, depends on (1) state and federal mobilization multiyear donor financing could be used to maintain of domestic revenue and allocation to education the fund. and (2) donor financing of education projects and education budget expenditure programs, both on- Those managing the fund would have the FGS and and off-budget. FMS (1) agree to a national per-student threshold set based on a fiscal analysis for education in Somalia Currently Somalia’s allocations to education as and approved by Member States and the FGS cabinet share of the national budget are about 1 percent, or legislature; (2) demonstrate a fair financial effort far below the GPE benchmark of 20 percent of their to meet this threshold from their own revenues, for budget to education. Over the past several years, example by spending a larger share of state revenues the federal government has also allocated some of on education (growing to 20 percent over time); and its budget to support education in the underserved (3) agree to a process for providing top-up funding federal states of HirShabelle, Galmudug, South West as needed by Member States on a per-child-enrolled and Jubbaland, but the budgeted amount comes basis, which would be transferred each year. A critical to less than $2 million a year for all four states.38 component of this option is a credible, transparent, For their part, Member States spend little of their and up-to- date EMIS and financial monitoring own resources on education due to low revenue system, since top-up distributions would be based mobilization and other priorities. Almost all of the on EMIS data on enrollments and state expenditures funding for education in Somalia today is provided reported in the previous year. Monitoring and control by external donors, such as the United Nations, of distribution, transfer, and use of resources would other multilaterals, bilateral partners, NGOs, be shared between FGS and the Member States with philanthropies, and the Somalia diaspora. Although MoECHE as administrator. the federal government has set up processes for dialogue with donors and coordinating donor This approach can also incentivize Member programs, it has not yet managed to ensure that States to expand enrollments by tying top-up the funding flows reinforce efforts to strengthen funding to the number of children they succeed Somalia’s evolving federal education system or align in enrolling. A model for the fund could be the ESSP, p.160. 38 32 S om a l i a Eco n om i c Update Special Focus Fundamental Education Development Fund (Fundo The Somalia Development and Reconstruction de Desenvolvimento do Ensino Fundamental, Facility (SDRF)— which brings donor financing into FUNDEF) introduced in Brazil in 1996. FUNDEF was an integrated unit that facilitates collaboration and designed to equalize funding through redistribution ensures alignment of donor funds with the National of education resources, taking into account the Development Plan is transparent and efficient. The social and economic development of each state. A current structure of SDRF does not permit donors to recent OECD evaluation reported that the program, earmark funding for education. As a consequence, now in operation for over 20 years, has contributed many if not most contributors to education significantly to both increasing student enrollment negotiate their education projects with state or local and learning outcomes and enhancing teacher actors outside of the SDRF, for both on- and off- salaries. budget initiatives. This means that most funding for education does not benefit from SDRF’s processes Once such a fund is established, its criteria and and tools for monitoring donor funds and evaluating transparency would make it easier for donors to their impact. A separate education pillar (or an improve the equity of Somalia’s education system equivalent mechanism) in SDRF could overcome by providing financing to states and districts through these limitations. the Fund rather than by financing some Member States but not others. Meanwhile, however, MoECHE should adopt an oversight role that could, e.g., authorize new Figure 2.15: National Education Development Fund projects, as is the case with more mature federal systems like Pakistan, India, and Brazil. Agreed Minimum Per- Student Spend 2.5 Conclusion National Education Development Somalia has reached an inflection point in its Fund Top-Up efforts to create a firm foundation for its education State Expected Per- system. Complementing consolidation of a Student Spend governance structure characterized by well-defined responsibilities is the development and launch of a program of reforms. These could help reshape the State Actual Per- Student Spend education system to deliver much better results for more children and youth across the country. Source: Constructed by authors Recommended priorities for action are the following: Align Donor Funding • Establish a National Education Development Rebuilding education in Somalia will require a Fund that ensures adequate education financing sector-aligned aid architecture that (1) reinforces in Member States with incentives and support to the leadership of the MoECHE in planning and maximize student enrollments. programming, in consultation with FMSs, donors, • Partner with the nonstate sector and communities and development partners; (2) regularly monitors commitments, disbursements, and the impact of to deliver affordable and quality schooling in education aid; and (3) permits education-focused localities that are today severely underserved. donors to earmark funds to the sector. August 2 0 1 9 | Edition No. 4 33 Special Focus • Adopt a fundamental quality framework for These options all depend fundamentally on the schools backed up by a school improvement fund school-level data captured by the EMIS. For that ensures that every school in Somalia offers this reason, enhancing the quality, reliability, adequate conditions for learning. transparency, and timeliness of the EMIS is the sine qua non for these priority actions. • Use technology to provide learning support to teachers and students throughout Somalia. • Adopt a student assessment system that routinely measures and leads to action based on what matters most – what students know and are able to do. 34 S om a l i a Eco n om i c Update APPENDICES Appendices Appendix A: Estimating GDP in Somalia This appendix describes methods that have been used to make provisional estimates of Somalia’s gross domestic product (GDP). It gives particular emphasis to how GDP for 2013–18 has been updated to incorporate data from Wave 2 of the Somalia High Frequency Survey (SHFS). Unlike previous surveys, Wave 2 covered virtually all of the area of Somalia and included nomads. It also employed more sophisticated sampling techniques. These factors make its estimates of household consumption more statistically reliable that previous ones and therefore a better basis for estimating national GDP. Wave 2’s results indicate that previous household surveys overstated average consumption. Consequently, the GDP estimates published in the past overstated actual GDP in Somalia for 2013–18. The annex identifies several other implications of revising the 2013–18 GDP estimates with data from the Wave 2 survey. When annual government revenue and spending are scaled by the value of GDP, they appear higher using the revised GDP estimates. The ratio of public debt to GDP is also higher. However, ratios of public debt to government revenue or of external debt to exports—two indicators that are important for debt relief—are not affected by this revision. Finally, the annex identifies several caveats that apply to GDP estimates based on either Wave 1 or Wave 2. Unfortunately, neither provides a good indicator for measuring changes in real GDP. The challenge of estimating GDP in Somalia Somalia faces severe constraints in producing estimates of GDP and other socioeconomic data. It has been decades since the government has been able to gather key data. The last complete set of national accounts was published in 1991, the last nationally representative household income and expenditure survey was conducted in 1985, and the last population census was taken in 1975. This gap is one legacy of civil war and disintegration of state institutions that the country is working to fill. The World Bank, IMF, Statistics Sweden, and other international partners have been working with the Federal Government of Somalia to rebuild the national statistical system, and in the meantime to make provisional estimates of GDP and key indicators needed for policy making. Applying the expenditure method to estimating Somali GDP In a conventional setting, a country’s statistical authorities regularly gather a wide range of data that are used to construct GDP. They collect information on the expenditure components of GDP— household consumption, government spending, investment and net exports—as well as on the value of goods and services produced in the economy and also information on incomes earned by the economy’s factors of production (land, labor and capital). Statistical authorities take advantage of the fact that total GDP is conceptually identical whether computed from spending, production, or income data. By comparing estimates from multiple approaches, they can compensate for deficiencies in the data that inevitably arise when following any of one of them. The severe data constraints in Somalia rule out computing GDP using the production or income method at this time. It has been possible to construct an estimate using proxies for the expenditure components, however. In the absence of firm-level surveys, for example, one can proxy firms’ investment spending using data on imports of the major items that firms purchase when they undertake new investments. The existing 36 S om a l i a Eco n om i c Update Appendices household surveys can be used to compute consumption. Somali customs data collection systems are still in development and national historical statistics do not exist. So-called “mirror statistics” published by Somalia’s trade partners have been the primary source for data on trade flows, supplemented where possible with information gathered by Somali customs officials and the Central Bank of Somalia’s balance of payments statistics. Figure A 1 presents the components and data sources that have been used since 2015 to estimate GDP in Somalia.a Figure A 1: Expenditure components of GDP and sources of data • Average daily household consumption (estimated by the SHFS) × Somali population × 365 days, adjusted by the CPI Consumption • Plus imputed rental services from owner-occupied housing (based on SHFS data) and an adjustment to account for consumption financed by grants Government • Combined federal and state government spending on personnel, procurement of goods and services, and consumption of fixed capital (using government fiscal operations data) • Business gross fixed capital formation, proxied by imports of capital goods, cement, and Investment transport equipment (using UN Comtrade exporter data), adjusted to domestic producer prices • Plus federal and state capital spending (using government fiscal data) • Merchandise imports and exports data from IMF Direction of Trade Statistics, supplemented by Net exports national statistics from non-reporting countries • Service exports and imports proxied by travel data from the Immigration Department Table A 1 below shows values for these components that the IMF and World Bank have computed using the latest available data. Deflators for the expenditure components are used to convert nominal values into constant 2013 U.S. dollars. The household and government consumption deflators are based on the CPI series produced by Federal Directorate of National Statistics (DNS). IMF international price deflators are used for investment, exports, and imports. Table A 1: Estimated nominal GDP, 2013–18 (millions of U.S. dollars) Expenditure component 2013 2014 2015 2016 2017 2018e C Household final consumption expenditure 5,685 6,022 6,113 6,373 7,098 7,358 Consumption of goods and services 5,192 5,412 5,585 5,817 6,351 6,745 Imputed rent and adjustments for grants 493 610 528 556 747 613 G Government final consumption expenditure 272 319 320 361 496 531 I Gross fixed capital formation 555 582 565 592 545 309 Private investment spending 555 570 550 564 519 0 Public investment spending 0 12 15 28 26 0 Net exports of goods and services -2,618 -2,959 -2,949 -3,127 -3,630 -3,478 X Exports 943 945 1,038 1,067 994 1,224 M Imports 3,561 3,904 3,987 4,194 4,624 4,702 Gross domestic product = C+I+G+X–M 3,892 3,964 4,049 4,198 4,509 4,721 Memorandum Real GDP (constant 2013 dollars) 3,892 3,984 4,122 4,241 4,300 4,420 Annual real GDP growth rate (percent) 1.9 2.4 3.5 2.9 1.4 2.8 Sources: IMF and World Bank staff estimates Note: 2018 is a preliminary estimate; complete data on investment proxies are not yet available. a The IMF Statistical Affairs Department worked with the Directorate of National Statistics to develop this method. This is described in IMF, “Somalia: Report on a National Accounts Statistics Mission,” August 2017. August 2 0 1 9 | Edition No. 4 37 Appendices The challenges of measuring household consumption in Somalia Estimating consumption spending has proved to be the biggest challenge in Somalia. In an ideal setting, the national statistical authorities would periodically conduct a detailed household budget survey, visiting a sample of households throughout the country that is drawn from the national population census. This ensures that sample data can be correctly extrapolated to the whole population to arrive at a statistically reliable estimate of national consumption for the GDP calculation. Statistical authorities routinely supplement these survey-based data with additional information related to household spending and income to arrive at an estimate of total household final consumption expenditure for each year.b In the absence of a population census and a full household budget survey, the World Bank has supported DNS to estimate consumption and poverty by conducting household surveys using the Rapid Consumption methodology. This methodology employs an abbreviated questionnaire and multiple statistical imputation techniques to estimate household consumption in situations where security risks or other factors make it impractical to conduct a conventional household budget survey.c In 2014, the World Bank and DNS piloted the Rapid Consumption methodology in Mogadishu, which it combined with results from the 2013 Somaliland Household Survey to inform the 2015 GDP estimate. The World Bank has progressively expanded the geographic scope of these surveys and improved their quality (Figure A-2). The World Bank scaled up the Mogadishu pilot in 2016 as Wave 1 of the SHFS. This surveyed households in North East, North West, and Banadir. The World Bank carried out Wave 2 of the SHFS during the last quarter of 2017 and first quarter of 2018.d This further expanded the survey’s geographical coverage to include southern Somalia, which was not possible in Wave 1 due to security concerns. It also included the nomadic population, unlike previous surveys, as well as more households in internally displaced people (IDP) settlements. Wave 1 used the 2014 Population Estimation Survey of Somalia (PESS) to construct the sampling frame for urban areas. Wave 2 supplemented the PESS with other existing data sources to strengthen the statistical reliability of the urban, rural and IDP strata. SHFS Wave 2 is the first survey to be nationally representative. For purposes of estimating GDP, this means that estimates from Wave 2 paint the most credible picture of the country’s total consumption. Two practical challenges arise when using SHFS data to estimate Somali GDP, however. First, there is a widely accept population estimate for one year only: 12.32 million people at end-2013.e Values of population for other years are constructed by applying the UN World Population Prospect’s estimate of annual population growth for 2010–15 (2.88 percent per year) to the 2013 population.f Second, estimates from the three surveys are not directly comparable (due to coverage and sampling differences described above). One cannot use the Wave 1 consumption data to estimate 2016 GDP and then the Wave 2 data for 2017 GDP, for example. Instead, one must use the same per capita consumption estimate to construct the entire series of annual consumption. This edition of the SEU uses the estimate of b For example, statistical authorities often use the income tax register to correct for under-reporting of income, which is common in household surveys. In addition, many household surveys do not report the imputed rental value of owner-occupied housing, which must be estimated separately to obtain a complete account of consumption. See United Nations, “System of National Accounts 2008,” Report Number ST/ESA/STAT/SER.F/2/Rev.5, 2009. c The Rapid Consumption methodology is described in Utz Pape and Johan Mistiaen, “Measuring Household Consumption and Poverty in 60 Minutes: The Mogadishu High Frequency Survey,” World Bank, June 2015, and in World Bank, “Somalia Poverty Profile: Findings from Wave 1 of the Somalia High Frequency Survey,” World Bank, June 2017. d World Bank, “Somali Poverty and Vulnerability Assessment: Findings from Wave 2 of the Somali High Frequency Survey,” forthcoming July 2019. The microdata from both Wave 1 and Wave 2 of the SHFS are published on the DNS website at . e UNFPA, “Population Estimation Survey 2014 for the 18 Pre-War Regions of Somalia,” October 2014. The survey was conducted from October 2013 through March 2014. The GDP estimation uses the PESS results as an estimate for the population at the end of 2013. f United Nations, “World Population Prospects: The 2017 Revision,” Report ST/ESA/SER.A/399, 2017. 38 S om a l i a Eco n om i c Update Appendices Figure A 2: Expanding coverage of household surveys, 2013–17 Regions covered Regions covered Regions covered Regions not covered Regions not covered Regions not covered Source: World Bank, “Somali Poverty and Vulnerability Assessment,” June 2019 (forthcoming). Notes: The boundaries on the map show approximate borders of Somali pre-war regions and do not necessarily reflect official borders, nor imply the expression of any opinion on the part of the World Bank concerning the status of any territory or the delimitation of its boundaries. $1.26/day from Wave 2 of the SHFS to compute 2017 consumption, and adjusts this by changes in the annual CPI to compute nominal values for other years.g Finally, this nominal value of daily consumption is multiplied 365 days per year and by total population to arrive at a value of annual household consumption in current dollars, as shown in Figure A-3. The full series of annual estimates of Somalia household consumption of goods and services for 2013–18 is presented in Table A-2. Figure A 3: Method for estimating 2018 consumption 2017 per 2018 CPI 2013 2.9% annual 2018 nominal capita population growth consumption consumption 2017 CPI over of goods 5 years and services 2018 per capita consumption 2018 population Table A 2: Estimates of household consumption of goods and services, 2013–18 2013 2014 2015 2016 2017 2018e Mogadishu consumer price index 99 100 100 102 108 111 Nominal per capital daily consumption $1.15 $1.17 $1.17 $1.19 $1.26 $1.30 Estimated population (million) 12.32 12.67 13.04 13.42 13.81 14.21 Consumption of goods and services (million) $5,192 $5,412 $5,585 $5,817 $6,351 $6,745 Sources: CPI from DNS, 2017 per capita consumption from Wave 2 of the SHFS, 2013 population from the 2014 PESS. Notes: Data points from source surveys are in shaded cells; other values are constructed estimates. Each year as assumed to have exactly 365 days. g The CPI is published by the Federal Directorate of National Statistics at . This is currently based on price surveys conducted in Mogadishu only. DNS is working to expand the price survey to other markets in the country. August 2 0 1 9 | Edition No. 4 39 Appendices Implications of these challenges for Somali GDP estimates This method of estimating GDP has several implications. The most important expenditure component— household consumption—is based on three constants: 2017 per capita consumption, 2013 population, and the average population growth rate. Consequently, all year-to-year variations in real GDP growth come from changes in government spending, GDP deflators, and international trade flows (which are used not only for net exports, but also to construct the proxy for private investment spending). This weakens the value of GDP as an indicator for measuring changes in household welfare from improvements in security conditions, for example, or from adverse weather shocks. Factors that may be unique to one survey or one year are imposed on all years. For security reasons, Wave 1 was conducted only in the safest areas of the country. These happen to be the most prosperous as well. Applying its per capita household consumption estimate of $1.73/day to the entire population likely overstates true GDP for all years in the series. Wave 2 happened to be conducted during an unusually severe drought. Its estimate of $1.26/day likely understates GDP for all years. Finally, the entire GDP series must be revised after each household survey. Even after Somalia’s statistical systems are fully rebuilt and the statistical authorities resume collecting data needed to estimate GDP using conventional methods, they will regularly revise official statistics as new information becomes available. But in most countries, such revisions affect only the most recent few periods. Only when the national accounts are rebased to reflect changes in the structure of the economy (generally once every decade) are there such large changes in a longer-term series. How do these considerations affect Somalia’s GDP estimates? Figure A-4 shows that changing the value of per capita consumption moves the level of nominal GDP up or down for all years (Panel A), but this has minimal effects on the growth rate of real GDP from one year to the next (Panel B). The chief effect on the growth rate is that the variation in annual growth rates over the series is greater when the constant value of real per capita consumption is lower. This is because the other expenditure components of GDP, which are based on data that show observable annual changes, have a greater weight in total GDP than household consumption. For this reason, one must be cautious about using annual changes in estimated GDP as an indicator of improvement or decline in national economic well-being. Figure A 4: Effects on GDP of changing the per capita daily consumption estimate A. Level of nominal GDP B. Rate of real GDP growth $8.0 4.0 $7.0 3.5 GDP (millions of U.S. dollars) $6.0 Real GDP growth rate, % $0.47/day x population 3.0 $5.0 and change in CPI 2.5 $4.0 2.0 $3.0 1.5 $2.0 1.0 $1.0 0.5 $0.0 0.0 2013 2014 2015 2016 2017 2018e 2014 2015 2016 2017 2018e Wave 1 ($1.73/day) Wave 2 ($1.26/day) Wave 1 ($1.73/day) Wave 2 ($1.26/day) Source: World Bank staff calculations Notes: These figures show only the direct effects of using a different value of per capita daily consumption. Previously reported GDP statistics were based on older CPI, fiscal, and trade data and therefore differ from what are shown here. 40 S om a l i a Eco n om i c Update Appendices Changing the level of GDP naturally changes the value of other indicators that are important for policy makers. When expressed as a ratio to GDP, government revenue and spending reported for 2013–18 in this edition of the SEU appear substantially higher than what was reported in previous editions. This is because of the change in the daily consumption estimate, not because of a sudden change in the government’s capacity to collect or spend money. Similarly, the ratio of debt to GDP is also much higher, even though the budget remains balanced and there has been no change in debt management.h As shown in Figure A-5, the levels of these variables are higher when the per capita daily consumption estimate from Wave 2 is, but otherwise the trajectories of how they change over time are the same. Figure A 5: Other effects of different per capita consumption estimates A. External debt burden B. Domestic revenue 3.5 120 3.0 100 2.5 80 Share of GDP Share of GDP 2.0 60 1.5 40 1.0 20 0.5 0.0 0 2014 2015 2016 2017 2013 2014 2015 2016 2017 2018e Wave 2 ($1.26/day) Wave 1 ($1.73/day) Wave 2 ($1.26/day) Wave 1 ($1.73/day) C. Total FGS spending D. FGS transfers to FMSs 6.0 0.70 5.0 0.60 0.50 Share of GDP Share of GDP 4.0 0.40 3.0 0.30 2.0 0.20 1.0 0.10 0.0 0.00 2013 2014 2015 2016 2017 2018e 2013 2014 2015 2016 2017 2018e Wave 2 ($1.26/day) Wave 1 ($1.73/day) Wave 2 ($1.26/day) Wave 1 ($1.73/day) Source: World Bank staff calculations. Other revised data incorporated into the updated GDP series The GDP statistics reported in this edition of the SEU also incorporate other new or revised data. More complete international trade and government spending data for 2017 have become available since the 2018 edition of the SEU, and data for 2015 and 2016 have been revised slightly to incorporate updated statistics. In addition, the new GDP series uses official CPI data from DNS as the source for household and government consumption deflators in place of CPI data constructed using other data. Average inflation rates implied by the constructed CPI estimates are somewhat lower for 2015–17 than official DNS estimates (see Figure A-6). The previous CPI data tended to overstate real GDP. h One should note that updating GDP with the latest consumption data has no effect on the ratio of external debt to exports, which is a key variable for determining the amount of debt relief in the Heavily Indebted Poor Country initiative. August 2 0 1 9 | Edition No. 4 41 Appendices Figure A 6: Inflation estimates used in GDP deflators 7.0 6.0 Percentage change in average CPI 5.0 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 2013 2014 2015 2016 2017 2018e Previous estimates Current DNS release Source: DNS, IMF. Looking ahead In the coming years, as the country continues to rebuild the national statistical system, DNS will begin estimating the total value added of production in agriculture, industry and services sectors of the economy. This will require DNS to conduct regular surveys of enterprises to supplement data on household and informal production obtained from household surveys.i Comparing estimates from both the demand (expenditure approach) and supply (production approach) sides of the economy will enable DNS to arrive at a more accurate estimate of GDP than is possible using data that are currently available. It will then be feasible for DNS to begin following the standard international practice of annually revising GDP statistics and periodically rebasing the national accounts to reflect long-term structural changes in the economy. i The World Bank is currently preparing an investment project to support this work. 42 S om a l i a Eco n om i c Update Building Education to Boost Human Capital Somalia’s economy is slowly recovering from 2016/17 drought impact and the country continues to strengthen its public finances. Real GDP grew by an estimated 2.8 percent in 2018 compared to 1.4 percent in 2017 and will remain unchanged in 2019. Moderate real GDP growth of 3.2–3.5 percent is projected over the medium term. However, the economy continues to face significant challenges and the projected poor harvests due to below-average 2019 Gu rainfall is a reminder of the cyclical climatic shocks that will continue to stretch the country’s fiscal and economic resources. Lower agricultural output (both crops and livestock), exacerbate food insecurity, water stress, households’ income, increases humanitarian needs, and threatens growth outlook. Social outcomes are poor across the country. Education access and learning outcomes are low, and health indicators are among the worst in the world. Globally, it is estimated that 10 to 30 percent of differences in GDP per capita are attributed to differences in human capital. Investing in human capital will be essential if Somalia is to escape the trap of poverty and violence and move back onto the path to prosperity. The crucial 40 percent of Somalis who are now aged 6 to 18 need to acquire the knowledge, health, and skills to become productive contributors to the country’s economy and thus break the cycle of conflict, exclusion, and vulnerability. World Bank Group SOMALIA ECONOMIC UPDATE Delta Center Menengai Road, Upper Hill Join the conversation: P. O. Box 30577 – 00100 Twitter Nairobi, Kenya @mpfsomalia Telephone: +254 20 2936000 Website: www.worldbank.org/somalia Find out more on: #SomaliaEconomicUpdate Photo credits: MoECHE, FGS; AU/IST; UNICEF Somalia; and FAO Somalia.