1. Presented by: Abdirahman Shariff Abdirizak Hassan

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

3.  Use of government system – bring all aid expenditures on budget and in government system = best aid modality ◦ It ensures ownership, alignment and harmonisation  Measure of success is to determine how much is used in the government system  There are eight measures to determine to what extent aid on budget

4. On planProgramme and project aid spending is integrated into spending agencies’ strategic planning and supporting documentation for policy intentions behind the budget submission On budgetExternal financing including programme and project financing and its intended use are reported in the budget documentation On ParliamentExternal financing is included in the revenue and appropriations approved by Parliament On TreasuryExternal financing is disbursed into the main revenue funds of government and managed through government’s systems On procurementExternally financed procurement follows government procurement procedures On accountingExternal financing is recorded and accounted for in the government’s accounting system in line with government’s classification system On AuditExternal financing is audited by the government’s auditing system On reportExternal financing is included in ex-post reports by the government

5.  There have been innovative approaches in many countries  There are three “star” examples ◦ Sierra Leone ◦ Afghanistan ◦ Liberia  But also a range of other individual innovations in challenging environments ◦ Zimbabwe ◦ Timor Leste

6. Afghanistan Trust Fund Sierra Leone Budget Support Liberia Health Pooled Fund

7.  Benefits included: ◦ a non-inflationary boost to public spending ◦ higher spending in MDG-related areas ◦ significant improvements in public financial management. ◦ provision of a robust donor coordination mechanism  But it was high-risk, high-benefit strategy: ◦ Based on very close relationship between UK and Sierra Leone government at political and security level ◦ In general donors no longer willing to take such risks ◦ But EU is leading the way with new Statebuilding Contract ◦ And DFID is considering whether it needs a similar instrument.

8.  Great success – originally designed to manage around $50m but ended up managing $ 5 billion  Reasons for success: ◦ Enabled financing of recurrent expenditures including police salaries which donors are normally reluctant to fund ◦ All expenditures were audited on monthly basis – if audit on any item failed then the government was not reimbursed for that item for that month – this ensured money was well spent and any problems were picked up quickly ◦ Government used the trust fund as a bank account ◦ Limited earmarking (50% limit) so reflect government priorities ◦ Flexible procurement

9.  Large share of donor assistance is for humanitarian purposes  Uncoordinated aid expenditures- duplicative and inefficient.  Many and sometime contradictory instruments in existence (and new ones proposed)  Most aid flows outside the budget & Somali government institutions  Inadequate information of how donor funds are spent and what is their impact  No option to support recurrent costs of Government

10. Fund NameFGS Role Somali Stability FundUnclear role on advisory board Basket fund for the Rule of LawChairs Steering Committee Somaliland Development FundNot clear/Consultative role at best Peace-building Trust Fund for Somalia None - only consultation on project choice Fund for the Restructuring and Rebuilding of the Somali Security Sector Unclear role on steering committee Trust Fund in Support of the Somali Transitional Security Institutions Not clear/Consultative role at best Trust Fund in Support of the African Union Mission to Somalia Not clear/Consultative role at best Trust Fund to Support Initiatives of States Countering Piracy off the Coast of Somalia Not clear/Consultative role at best Special Finance FacilityChair Oversight Committee; manages bank account

11.  Bring together all fund instruments under one umbrella coordination mechanism chaired by the Government  Establish Finance Committee chaired by Minister of Finance and Planning  Establish government led joint secretariat in Mogadishu to ensure transparency, accountability and effective monitoring of impact  Integrate all government and donor funded activities into single budget presentation

12.  Quickly (as in Afghanistan) and not slowly (as in South Sudan)  According to the areas that Somalia prioritises and not just to the traditional donor priorities  That maximises the use of the government’s own systems  That builds government’s own capacity and doesn’t undermine it  In a transparent and accountable way to all Somalis  That delivers results in the most cost effective way

13. Somali Development and Reconstruction Facility SDRF Priority Fund 1 Project Allocation Priority Fund 2 Priority Fund 3 Project Allocation High Level Steering Committee Technical Finance Committee Donor Funds are combined into a single Fund Account, managed and administered by Committee Finance Committee Line Ministries and regions submit project proposals to request funding from the Priority Funds Funds are allocated to specific a priority fund, e.g. Security. Priority Funds are administered by SFG and contributing donor/s Composed of SFG and Donors and chaired by SFG Responsible for allocating funds from the Priority level to Projects Composed of SFR and Donors and chaired by SFG and Responsible for making funding decisions at the priority level Single Treasury Account

14.  Incorporate the comments today  Continue the discussion with our partners

15.  Support the SFF and allow it to demonstrate its effectiveness  Donors to place key decision makers in Mogadishu – this is best way of developing trust that is fundamental to effective aid partnership  Develop plan for service delivery

16. Thank You For Listening Questions and Discussions