Report No. 6542-SO

SomaliaRecent Economic Developments andMedium-Term ProspectsFebruary 10, 1987

Country Programs IIEastern and Southern Africa Region

FOR OFFICIAL USE ONLY

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Dmiuf. eW_ ]

MUMaA _M-ay btured tecipientsa"un. ks contemay n otherwise

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CURRENCY EQUIVALENT

Currency Unit = Somali Shilling (So. Sh.) = 100 cents

ABBREVIATIONS

ADC - Agricultural Development CorporationAMF - Arab Monetary FundASAP - Agricultural Sector Adjustment ProgramCPE - Centrally Planned EconomicsCPI - (Mogadishu) Consumer Price IndexCSD - Central Statistical DepartmentDAC - Development Assistance CommitteeDOD - Debt Outstanding and DisbursedECA - UN Economic Commission for AfricaENC - The National Commercial AgencyHASA - Hides and Skins AgencyMNP - Ministry of National PlanningMOF - Ministry of FinanceOECD - Organization for Economic Corporation and DevelopmentOPEC - Organization for Petroleum Exporting CountriesNBB - National Banana BoardONAT - Farm Machinery and Agricultural Services CorporationPIP - Public Investment ProgramTYDP - Three-Year Development Plan (1979-1981)UNHCR - United Nations High Commission for Refugees

GOVERNMENT OF SOMALIA

FISCAL YEAR

January 1 - December 31

FOR OMCIL US ONLY

This report is based largely on the findings of an economicmission which visited Somalia during June-July 1986. The mission comprisedMessrs. Swadesh Bose (Mission Chief), Jack van Holst Pellekaan(agriculture), George Beier (public investments), Ashok Khanna (industry),Alberto Agbonyitor (micro-economics), Thorveld Moe (external debt,consultant), and Ms. Seema Hafeez (public finance, consultant). SwadeshBose is the principal author of this report.

The draft report was discussed with the Somali authorities byMessrs Bose and Beier in January 1987.--------------------------------------------------------------- __---------

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

SOLIAt RECENT ECONOMIC DEVKLOPMHNTS AND MEDIW-TERM PROSPECTS

Table of ContentsPate No.

COURY DATA (i-iii)

EECUTIE S AR Y (iv-ix)

CHAPTER I Introduction 1

Scope of Report 1Background 2An Overview 4

CHAPTER II Recent Economic Developments 6

Production Growth 6Domestic Investment and its Distribution by Sector 9Macro-Economic Imbalances 10Balance of Payments 13External Debt 16Fiscal and Monetary Developments 21Key Performance and Incentive Indicators 26

CHAPTER III Progress of Policy Reform and Remaining Issues 30

A. Liberalization and Incentives to Promote 31Production

B. Exchange Rate Regime 36

Background 36Evolution of Exchange Rates 37Operation of the Free Foreign Exchange Market 39Effects of the Exchange Rate System 40

C. Fiscal Policy and Public Expenditure Program 41

Public Sector Resource Mobilization 42Commodiry Aid Utilization for the Budget 44Public Expenditures 46Public Sector Salaries 50

D. Summarv and Recommendations 50

CHAPTER IV Medium-Term Prospects 54

Constraints 54Growth Prospects 55Balance of Payments Prospects 57Debt Relief 61Government Budget Prospects 67

STATISTICAL AMN=E 71

SOMALIA COUNTRY DATA

Economic Indicators

ONP Per Capita n US3281 (19865)1

Annual Rate of Growth of GDPat Constant Factor Cost (t)

Gross Domestic Product in 19865(Fiscal Years)

US$ Min X 1980-83 1984 1985

CDP at Market PrIces 1516.0 136.0 4.6 3.6 8.3Investment 232.1 15.3Resource Balance -275.5 18.2Export of Goods and NFS 14096 9.8Import of Goods and NFS 416.1 27.4

Output In FY 1985

Value Added (Factor Cost)

Agriculture 829.1 67.6Industry 127.2 8.8Services 482.7 38.6

1439.9 lW-.

CENTRAL GOVERNMENT FINANCE

1980 1981 1982 1988 1984 1986

ti l l l1t o n So. Sh)

Total Revenue 1421 2268 2769 4263 8979 5220Curront Expenditure 1892 2295 2906 4716 8140 9918Current Surplus or Deficit (-) -861 -32 -146 -463 -4161 -4898Investment Expenditures la8 1426 2481 1920 3182 7949Overall Deficit -1711 1467 2689 2_83 7343 12638

l/Exchange rate used for conversion into US dolars is 1US$ = 63.6 So. Sh.This exchange rate is derived by assigning 50 percent weight to theofficial exchange rate and 50 percent weight to the average of thecommercial and free market rates.

BALANCE OF PAYMENTS

1960 1901 1932 t 1914 1901

Merchandiso Exports (f.o.b) 134 114 157 101 62 9JMerchandise Imports (c.l.f.) -461 -422 -434 -41U -496 -362Trade Balance -W1 -ai 7 -J49 -5M N1

Non-factor service -6 9 23 24 -3 -Interest Paymwnt. -2 -10 -14 -21 -44 -43Private transfers, not 57 64 go 51 72 29Current Account Balance -271 !i5 -2Wf -2WC -ST -2W1

Official Loans, Not 143 16S 157 140 174 179Other Capita 37 79 123 1in 46 69(Incl. rrors A omissions 21 3 -36 -39 -46 -36

Overall Balance -27 -13 -44 -86 -139 so

RATE OF EXCHANGE

W1101l Rate

From 1973 to June 39, 1901 - US81.0 * So. Sh. 6.295

July 1, 1981-Juno 3J, 1982 - A dual exchange rate with:USS1.11 a 6.295 (for essential lmports)USJ1.49 a 12.59 (all other foreign transoctleas)

July-l, 1902-Oct. 22, 1983 -- USJ1.00 a So. Sh. 15.227

Oct. 23, 198W-Sept. 14, 1914 - USSn.OO a So. Sh. 17.55Sept. 15, 1094-Doc. 31, 1984 - USS1.40 So. Sh 26.00Jan. 1, 1986-Feb. 28, 1905 - USS1.00 a So. $h. 36.09

Official Rate Free Market Rate

1985 March 37.0 91.4June 40.6 97.8Sept. 40.6 100.7Dec. 42.5 114.7

1986 Jan. 64.5 114.8March 82.5 138.6June 74.5 152.3sept. 86.6 134.0Dec. 90.5 132.0

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MONEY. CREDIT AND PRICES

Doe. Doc. Doe. Doc. D1c. Doe1960 19 1902 19118 1964 165

(Million So. Sh)

Bank Claim, on Government (net) 1,982 2,260 2,199 1,805 4,378 6,252Bank Claim on Privato Sector 426 675 1624 2298 8727 4024Bank Claims on Public Enter. 1651 1722 1890 1168 1511 2671Mon.y Supply (MI) 2,768 8,619 $,911 4,167 6,676 9,117

(Index Numbers)

Consumer Price Index (1977=199) 218.7 818.4 848.2 624.0 1996.6 1867.9

Annual Percontage Change

Consumer Price Index 69.0 44.6 22.6 36.4 92.1 37.9Bank Clalm on Private Sector -4.7 85.0 102.4 41.2 62.5 6.9Bank Claim on Public Enter. 21.8 11.9 -24.6 -19.6 29.9 87.1Money Supply (MI). 19.2 80.9 0.1 8.8 22.2 79.5

MECHANDISE EXPORTS

Av*rcog 199-62 1968 1984 1986

USSIMIn _ USS Min _ US SMln X USS Min X

Livestock 1M1.$ 79.8 72.0 71.5 83.1 5$.4 66.9 71.4Bananso 9.4 7.3 15.9 14.9 14.1 22.7 1 J. 14.1Met A &Mt Products 9.6 9.4 9.2 9.1 - - - -Hides and Skins 6.2 4.0 1.5 1.5 8.9 6.8 4.8 4.6Fish A Flh Products 1.8 1.9 2.8 2.8 0.4 0.6 0.2 0.2Others 10.2 6.9 9.7 9.7 19.5 17.0 9.0 9.7TOTAL 1H El. 19.-.7 199 . 62. 1 9i5 liU.

EXTERNAL DEBT US$ Min.

Public Dobt (Doc.31,1989) 1542.7

DEBT SERVICE RATIO (1965) XAccrual basis 104.0Cash basis 48.9

IDA LENDING (DEC. 31. 1986)

Outstanding and Disbursed 215.23Undisbur.ed 47.94Outstaning Inc. Undisbursed 268.17

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EXECUTIVE SUMMARY

INTRODUCTION

1. Somalia is among the least developed countries of the world.Endowed with rather limited known natural resources and a fragileenvironment for agriculture, it faces formidable constraints to economicdevelopment in the face of a 3 percent annual growth of population.Livestock production accounts for nearly 40 percent of GDP and 80 percentof exports, but cannot increase rapidly since the capacity of the rangelandhas nearly been reached. A rapid growth of crop production which accountsfor about 12 percent of GDP will require investments in irrigationrehabilitation and development, as well as in other infrastructure,research and extension. Development of the tiny industrial sector isconstrained, among other things, by a scarcity of skills. Somalia'seconomic development is a challenging task requiring sound policies. Onthe contrary, pervasive Government controls led to grossly inefficientresource use and hindered growth in the 1970s; and for a number of yearsSomalia has been suffering from serious domestic and external financialimbalances, rapid inflation and debt service crisis. Since the firstConsultative Group meeting in 1983, the Government with the support of thedonor community embarked on a program of policy reform to achieve the twinobjectives of financial stabilization, and economic adjustment and growththrough fostering greater market orientation.

Recent Economic Performance

2. Real GDP growth in 1984 and 1985 was between 3 and 6 percent peryear originating mainly from livestock and crops. The reform programinvolving trade liberalization, exchange rate reform, and dismantling ofagricul-ural prices and marketing controls, with favorable weather, led tothe recovery of production and exports. For two consecutive years,production of crops particularly foodgrains has increased remarkably.Maize production increased from 235,000 tons in 1983 to over 380,000 tonsin 1985 (Table 2.2). Export earnings increased from $62 million in 1984 to$93 million in 1985 as the search for new markets for livestock began toyield results. Real economic growth was accompanied by a modest decline inimports from $406 million in 1984 to $362 million in 1985 as increaseddomestic production led to reduced food imports. Domestic inflationdeclined from 92 percent in 1984 to about 37 percent in 1985 and 1986.There was a marginal reduction in the current account deficit on thebalance of payments due considerably to about $150 million debt reliefobtained in 1985. Still new paymen-ts arrears were accumulated in 1985which added up to total arrears of $173 million. There was modestimprovement of the budget deficit as domestic revenue made some recovery.

Implementation of Policy Reforms

3. After the relapse in 1984, implementation of policy reformimproved in 1985 and has continued through 1986. Pricing and marketing ofmost agricultural goods have been liberalized, major price controls have

been dismantled. Most of the controls on export and import trade havebeen liberalized. A gradual but large devaluation of the official exchangerate (So. Sh. 90.5 - $1 in December 1986, compared with So. Sh. 26-$1 inDecember 1984) and the introduction of a free foreign exchange market for50 percent of all *xport earnings are yielding an export rate of about Sh.115 - $1 in late 1986 (See Table 3.1) and providing incentives toagricultural production for exports and import-substitution. In theimplementation of exchange rate reform, however, a de facto transientmultiple exchange rate system emerged with distortive effects on resourceallocation. In addition to the export rate, various imports facedifferent rates: the official rate, the free market rate (about So. Sh. 135to the dollar in late 1986), the auction rate (about So. Sh 110 - $1), andthe commercial rate (of So Sh 83.60 - $1, but discontinued since September1986).

4. However, there are still some important areas in agriculturalpricing and marketing which remain to be liberalized in order to provideincentives for export expansion through the participation of privateoperations. One such area is trade in hides and skins, and frankincenseand myrrh where existing public sector control is hindering potentialexport expansion (para. 3.6). Studies in this area have been commissioned.Another area is government control on petroleum importing, pricing anddistribution which is hindering efficient resource allocation foradjustment and growth (para. 3.9). The subsidization of tractor servicesby ONAT (the Government tractor hire agency) constitutes a barrier to entryof private operators for agricultural investment (para. 3.8). This issueIs also being studied under the ASAP credit.

5. In the industrial sector, there is still price control on somepublic enterprises (para. 3.13).

6. The unsatisfactory performance of industrial public enterprisesresults in a continued drain on the budget or the economy. Improvement ofefficiency of resource use in public enterprises which constitute the bulkof the industrial sector is essential for future economic and industrialproduction. Despite the Government's commitment since 1984 to publicenterprise reform through a combination of phasing out clearly unviableenterprises, privatizing (or forming joint ventures), restructuring andrehabilitating others in the public sector, substantive progress has yet tobe made. (para. 3.16)

7. Nominal interest rates were increased but are still below the rateof inflation. The creation of the Ministry of revenues in response todeterioration of tax effort has contributed to a recovery of revenuesparticularly in 1986. However, the basic factors inhibiting revenue growthremain unchanged. (1) Imports are valued for import duty purposes at theofficial exchange rate instead of the free market exchange rate. (2) Taxavoidance and evasion continue to undermine efforts at improved revenuecollection. (3) There is very little recovery of the costs of publicinvestment and services.

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8. Fiscal Policy and Public Experiditure Program. The current budgetdeficit still remains large as a result of slow growth in domestic revenuesand a continued expansion in expenditures. The continuing large publicdissavings are thwarting correction of the domestic financial imbalance andweaknesses in the expenditure program are undermining the productivity ofpublic investment. Improvement of public sector resource mobilization andof public expenditure program remain two major issues for Somalia.

9. In the absence of adequate public sector resource mobilization,local counterpart funds generated from cash and commodity aid were in 1985(according to donor estimates) equivalent to the domestic revenues on theGovernment budget in 1985 and these funds would increase in the comingyears (para. 3.46). In general, budgetary expenditure records andaccounting remain less than comprehensive. Certain items of currentexpenditure do not appear in the budget. And one third of the budget is acontingency item in the Ministry of Finance budget for which nodisaggregation is available (para. 3.49 - 3.50). In addition, it isunclear if there are any explicit subsidies (and to whom) included in thebudgetary expenditures called " transfers and recurrent expenditures".

10. Under-Funding of Recurrent Expenditure. The developmentexpenditures (i.e., PIP expenditures) of the Government remain largerelative to the recurrent budget. The future recurrent cost implicationsof new development projects (PIP) are not worked through during thepreparation of the public investment program. The budget formulationprocess does not attempt to quantify and mobilize resources for recurrentcost needs of completed development projects. To provide adequately foroperating and maintenance costs, the 1986 recurrent budget for theproductive sectors would have to be increased several times. (para. 3.44,Table 3.5). General services including defense consumed 88 percent of therecurrent budget in 1985 while the combined shares of economic and socialservices dropped to 12 percent from about 34 percent in 1976-80. Butdespite the Government's declared intent to the contrary this share wasfurther reduced in the 1986 budget. This share is extremely low comparedto Sub-Saharan Africa (37 percent) as a whole (Table 3.6). The grossunderfunding of recurrent costs led to deterioration of physicalfacilities, and services provided; e.g., roads and irrigation facilitiesdeteriorated badly requiring costly rehabilitation, and elementary schoolenrollment ratio fell from 30 percent in 1980 to 19 percent in 1984.

11. Civil Service Reform. Somalia has an oversized and ill-paid civilservice with adverse impact on morale and motivation. Without a well-compensated and well-functioning civil service public policy andexpenditure management would not improve adequately. There is need to

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recast salaries and restore the purchasing power of earlier years, and makeoverall compensation more visible. The additional expenditure can hardlybe met without a substantial increase in domestic revenue and a reductionin the number of employees. Donor support towards an increased salary billmust be only temporary and consistent with the stabilization objectives.The Government acknowledges the problem, but no substantive progress hasbeen made in this regard.

Overall Policy Performance

12. This mixed overall policy performance in 1985 and 1986 is,however, an improvement over 1984 when the implementation of the IMFstabilization program was suspended in the wake of sharp decline in exportsand tax revenues.

13. Despite these gains in policy reform, real GDP growth, recovery ofexports, and decline in imports, the external current account deficit andthe domestic savings investment gap remain large, about 22 percent of GDPin 1985. Recent developments do not indicate that the unsustainably largemacro-economic imbalances of the economy are being steadily corrected.Aggregate consumption exceeds GDP, so savings are nil or negative. Exportearnings cover only about a quarter of the value of imports.

14. External debt servicing is in a crisis state with the accumulationof over 170 million in arrears at the end of 1985. No rescheduling throughthe Paris Club has been arranged for 1986. Multilateral debt servicingalone would absorb about 50 percent of export earnings (Table 4.5) whilethe total debt service, excluding about $70 million frozen arrears accruedto Bulgaria, China and the USSR is over 100 percent of expected exportreceipts in the medium term.

15. It is to be emphasized that the economy has responded to policyreform in positive ways through agricultural growth, lower inflation,reduction of imports, and some recovery of exports. However, the effectsof these positive developments on the macro-economic imbalances of theeconomy is yet negligible mainly because the imbalances in themselves havebeen enormous and deeply entrenched.

Need for Sustaining Adlustment Policies

16. If the economy is to adjust, then the correction of thesefundamental imbalances together with growth promotion must be central toadjustment programs in the medium and long-term.

17. Progress towards adjustment of these imbalances would requireamong other things a sustained implementation of the remaining aspects ofthe policy reform program and new measures to promote efficient use ofresources in the economy. These include:

(a) unification of the exchange rate and its maintenance at arealistic level;

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(b) elimination of current budget deficits through increasesin revenue, and restructuring of recurrent expenditure infavor of economic and social services;

(c) improving productivity of public investment through useof profitability criteria in selecting projects with afocus on the growth generating sectors;

(d) removal of remaining controls on prices, marketing,exports and imports, especially of petroleum, hides andskins, and frankincense;

(o) improved food aid management to sustain Incentives fordomestic crop production;

(f) further improvement of incentives and opportunities toencourage private savings and investment, interest rateadjustment to improve credit allocation and introductionof private bank(s) to improve services to the privatesector;

(g) civil service reform with a reduction of numbers and arecasting of salaries; and

(h) public enterprise reform to phase out unviable enterprisesand to improve resource use efficiency.

18. Exchange rate policy and public expenditure management arecritical elements in improving resource use efficiency and correcting theexternal imbalance. Though exchange rate reforms have impos,ed disciplineon the private sector, the larger share of imports channeled through thepublic sector through grants and loans is not subject to the same marketdiscipline induced by adjustments in the exchange rate.

19. The PIP imports which constitute the largest single import itemare not, for example, subject to effective market discipline throughexchange rate reform. Even after the expected unification of exchangerates the larger share of total imports for the public sector will beinfluenced not by the exchange rate per se, but by the inflow of grants andloans.

20. Hence to enforce efficiency in the use of imported goods, andinduce a reduction in the external imbalance would require thats

(a) institutions for aid coordination and aelection ofprojects be strengthened and used to enhance theproductivity of the public investment program.

(b) use of imported goods is channeled increasingly throughthe private sector.

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Medium Term Prospects and Aid Requirements

21. With sustained policy reform and favorable weather complemented byaid flows, GDP growth of about 4.1 percent a year is feasible in the mediumterm. Sustained export recovery is also feasible with exchange rateadjustments, relaxation of restrictions on remaining exports and continuedsearch for markets for livestock outside Saudi Arabia.

22. With GDP growth above population growth, and assuming that socio-political constraints would not permit any compression of real per capitaconsumption, there would be slow (a) increase in the savings ratio from -7percent in 1985 to +1 percent in 1991, (b) increase in the investment toGDP ratio from nearly 15 percent in 1985 to 17 percent in 1991, (c)reduction in the ratio of trade deficit to GDP from 21 percent in 1985 to15 percent in 1991, and (d) overall internal and external adjustment inthe medium term as the consumption ratio declines, export ratio rises, andthe import ratio falls. (Table 4.2)

23. The economy would however, still depend on import surpluses tosupport consumption and investment with overall financing requirementsincluding debt service obligation between $400 million and $450 million peryear over the medium term. (Table 4.4) Even with growth, debt servicingwill be unmanageable (Table 4.5) without extra-ordinary measures.Multilateral debt service alone would require about 50 percent of expectedexport earnings in the medium tem. Total debt service obligations wouldaverage about $150 million per year during 1986-91.

24. Two scenarios of debt relief were simulated. Each case is basedon assumption that (a) all multilateral debt service must be paid and, (b)95 percent of all other debt is rescheduled. The analysis shows that toprovide positive capital inflow required to support growth and to improvethe debt service profile to a manageable debt service burden in the mediumand long term would require a combination of (i) multi-year or regularannual rescheduling of all bilateral obligations on soft (close to IDA)terms, and (ii) quick disbursing grants, including cash grants.

25. Two points deserve emphasis. First, even with policy reform andprospective growth, adjustment of the external deficit will be slow, andthe economy will in the foreseeable future, lack the capacity to meetexternal debt obligations. Second, rescheduling on soft terms need bepredicated on sustained implementation of policy reform.

26. During 1987 and 1988 Somalia will require average annual aiddisbursements of nearly $400 million, about $250 million in grants and $150million in (mostly concessionary) loans (Table 4.7); roughly one-half ofthese tnflows will be required for quick disbursing commodity aid andbalance of payments support in the form of food, petroleum, othercommodities and cash. Disbursements from the aid pipeline would amount toabout $300 million a year, and hence additional disbursements of nearly$100 million from new aid commitment will be necessary. In addition, about$70 million in debt relief per year will be required. As the existing aidpipeline gets exhausted, larger new aid commitments are required for 1989and beyond. Through the Consultative Group process it should be possibleto coordinate donor support to mobilize resources to finance theprospective gap, provided the Somali authorities sustain and strengthen thepolicy and institutional reforms required for adjustment and growth.

CHAPTER I

INTRODUCTION

Scope of the R&Port

1.1 This economic memorandum focuses on the adjustments that will berequired over che next few years if Somalia is to achieve realistic goalsof stabilization and economic development with a viable external paymentsposition. Based mainly on the findings of an economic mission whichvisited Somalia in June-July 1986, the present report is clearly lesscomprehensive than the previous economic report.l It covers the recentdevelopments mainly since 1984, and review the progress of implementationof the reform orogram with an assessment of exchange rate reform, andliberalization policies so far implemented. The central theme of thereport is recent macro-economic adjustment for growth in light of theGovernment's reform program, the recommendations of the previous Bankeconomic report and the 1985 Consultative Group (CG) understanding, andpolicy measures needed to sustain growth over the medium term, e.g.improvement of financial management and public investment program,effective incentives and better allocation of resources, and liberalizationto extend the market discipline.

1.2 Chapter II provides a review of recent economic and financialdevelopments with attention to progress towards correcting large macro-economic imbalances in the external current account and the governmentbudget, and towards correcting distortions in the policy framework,especially in prices, exchange rates, and interest rates.

Chapter III especially deals with policy implementation under thereform program, discusses achievements and shortcomings in threebroad areas -- pricing and marketing liberalization, exchange rateregime, and fiscal policy and public sector resource mobilization,and outlines the unfinished agenda of actions which need to beImplemented for sustaining the process of adjustment with growthover the medium term.

Chapter IV discusses the economy's prospects of growth assumingthat the recommended measures will be largely implemented andindicates the requirements of external aid and debt relief tosupport this process. The financial implications of medium-termgrowth of GDP are analyzed along with a projection of the balanceof payments. Since Somalia's huge debt service burden makes thefuture prospects very bleak without debt relief, alternativescenarios of debt relief are also presented along with aidrequirements, to indicate overall financing requirements.Finally, the chapter also provides a normative projection of thegovernment budget in order to indicate how fiscal managementshould and can evolve in order to achieve financial stabilizationand to support adjustment with growth in the medium term.

L/ World Bank (Report No. 5584-SO), Somalia: Towards Economic Recovery andGrowth (August 1985).

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BackRround

1.3 Somalia is a large but sparsely populated country of about 5.5million people (excluding refugees).2 With an estimated per capita incomeof about $260 it is among the poorest countries in the world, and isclassified by the United Nations as a least developed country. The averagelife expectancy at birth is only 46 years. Somalia's crude death rate of20 per thousand and infant mortality rate of 150 per thousand live birthsare among the highest in Sub-Saharan Africa. Modern health care isentirely confined to urban areas. The population per physician is 16,000,or about the same for low-income countries.

1.4 The country is poor in natural resources, with no known mineralsor fossil fuels. Its low and variable rainfall and largely rugged terrainpresent a harsh and fragile environment for agriculture. About 13 percentof the land is considered arable. Due to the limited physical and socialinfrastructure, and with water being the limiting constraint, hardly 10percent (or 1 million hectares) of the potentially arable land is actuallycultivated, mostly under rainfed conditions. About 50 percent of thepopulation are nomadic pastoralists who depend on livestock for theirlivelihood; roughly 25 percent are settled farmers, and the remaining 25percent are engaged in various non-agricultural occupations and live mostlyin urban areas. Somalia suffers from serious institutional weaknesses inboth public and private sectors. There is a critical shortage of skilledlabor and of personnel with technical and managerial expertise, along withan apparent excess supply of school leavers at almost every level ofeducation, reflecting an imbalance between the output of the educationsystem and the needs of the economy.

1.5 Following a major border conflict with Ethiopia in 1977/78,Somalia has been experiencing a serious economic and financial crisis inthe face of relatively stagnating production. The immediate consequencesof the conflict were sharp increases in government expenditures, mainly fordefense, and in bank financing of large budget deficits leading to highrates of inflation. The balance of payments counterpart of these budgetarydevelopments was a surge in imports through 1980, and a sharp decline inforeign reserves, accompanied by reduced capital flows (as the aid from theUSSR ceased and before other donors stepped up their aid). Beginning in1981, the Government decided to introduce policy and institutional reformstowards improving incentives, liberalizing the economic system fromextensive government controls and moving to correct policy-induceddistortions that had led both to economic stagnation and grosslyinsufficient resource use in the 1970's and to external and domesticfinancial crises since the late 1970s. The reform measures mainlycomprising exchange rate adjustments, fiscal and monetary restraint,interest rate increases, increases in agricultural producer prices and defacto elimination of the government monopoly of grain purchases, generatedsome recovery in the economy and led to increased external aid.

1.6 In 1983, the Government prepared a medium-term recovery programcomprising a public investment program (PIP) for 1984-86 and a program of

2/ The official figure used by the UNHCR for refugees in camps is 700,000.

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phased policy reform for achieving financial stabilization andrationalizing the pricing and incentive structure for output growth. Theprogram called for: improvement in macro-economic management throughfiscal, monetary and exchange rate policies; improvement in financialdiscipline and public investment programming; liberalization ofagricultural pricing and marketing; and an incentive framework forencouraging the private sector. At the first Consultative Group meeting inOctober 1983, donors welcomed the reform program and pledged support forthe PIP and the associated policies. However, because of the ban on Somalicattle exports to its principal market, the impact of the 1983 drought, andthe slackening of stabilization efforts by the Government and its decisionnot to implement additional policy measures including devaluation andfinancial restraint, a severe financial crisis reemerged in 1984 with arecord inflation, and mounting external debt service arrears.

1.7 Faced with a rapidly deteriorating situation, the Governmentadopted an adjustment program for 1985 under an IMF Stand-by Arrangementdesigned to reduce domestic and external imbalances, and to stimulateeconomic growth. At a special Consultative Group (CG) meeting in January1985, donors commended this program and pledged quick-disbursing assistanceto finance Somalia's balance of payments gap for 1985.

1.8 ARainst this background, the previous World Bank Economic reporton Somalia3 presented to the second Consultative Group meeting held inNovember 1985 noted that the main issues facing the economy were inadequatedomestic resource mobilization, negative savings, stagnating exports, veryhigh import dependence, low productivity of public investment, and poorfinancial discipline and public expenditure management. As noted inChapter III of the present report, it stresseed the need for strong policymeasures to raise domestic revenue and savings, to enforce publicexpenditure control and restrain monetary expansion for achieving financialstabilization, to liberalize price, trade and exchange controls forimproving incentives and resource allocation, and for encouraging theprivate sector to boost production and exports, and to raise the quality ofthe public investment program for sustaining economic recovery and growth.Keeping in view Somalia's long-term development, the report reviewed themain constraints to developments in agriculture and industry, eLnd discussedmeasures aimed at augmenting production and promoting the private sector.It also drew upon other sector studies to emphasize the need for populationpolicy and improved energy demand management for the long-term developmentof Somalia.

1.9 The constraints to Somalia's long-term development in the face ofa 3 percent annual growth of population noted in the previous report remainunchanged and will not be elaborated in the present report. The livestocksubsector--accounting for nearly 40 percent of domestic production--is andwill continue to be the major contributor to GDP and exports in Somalia forquite pome time. However, it is widely considered that the capacity of therangelands to sustain additional numbers of animals is at or near itslimit. There is, thus, a serious structural constraint to a rapid growthof GDP, and, to a lesser extent, of exports. Crop production which

3/ World Bank (Report No. 5584-SO), Somalia: Towards Economic Recovery andGrowth (August 1985).

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accounts for about 12 percent of GDP, can be increasingly more importantfor both import substitution and export expansion. This is, however,contingent, among other things, upon irrigation rehabilitation, newirrigation development and improved water management, as well as increasedproductivity of rainfed agriculture through better cultural practices,improved inputs, research and extension. In addition to Somalia's verysmall market and poor resources endowment, a serious scarcity of managerialand technical skills remains a major supply-side constraint to industrialdevelopment. Public enterprises account for nearly 80 percent of theoutput of the small manufacturing sector which contributes 6-7 percent ofGDP. Originally envisaged to process local agricultural, livestock andfisheries products for consumer-oriented import substitution and exportsthese enterprises have become heavily dependent on imported materials andoperate at a low level of capacity hindering output growth. Much of thesector suffers from inherent incompetitiveness and from an ineffectiveprotective system.

An Overview

1.10 As a result of the liberalization of agricultural prices andmarketing, exchange rate reform, search for and access to new exportmarkets, and a favorable weather, real production increased in 1984 and1985, and exports recovered from the depressed 1984 level. Real GDP growthwas accompanied by decline in imports, especially of food imports. Thus,trade deficit and inflation were reduced in 1985 and 1986.

1.11 Policy performance also improved, following the lapse of reformsin 1984. A new adjustment program was adopted in 1985 and continuedthrough 1986. Exchange rate reforms were implemented, leading to atransient ma'ltiple exchange rate system; agricultural prices and marketingcontrols were dismantled, the prices of export and import goods werepartially liberalized (the petroleum market is still controlled); andinterest rates were increased, though they are still below the rate ofinflation.

1.12 While these developments in economic and policy performance arepositive and in the right direction towards improving incentives andresource allocation to boost exports and domestic savings, the impact onthe fundamental internal and external imbalances of the economy so far isnegligible. Consumption exceeds real production, so savings remainnegative. Government tax revenues are grossly below governmentexpenditures. Exports, despite the recovery, cover only about a quarter ofimports; the balance of payments deficit, though reduced, remains close to$300 million (22 percent of GDP in 1985). There is a debt service crisiswith nearly $200 million arrears at the end of 1985, and a debt serviceratio of well over 100 percent of exports per annum in the medium term.

1.13 Sustained policy reform with respect to the removal of theremaining controls, interest rate changes, public enterprise reform,exchange rate unification and decontrol of remaining export and importgoods are required for the recovery to continue. Even with sustainedpolicy reform and a feasible GDP growth of 4.1 percent a year, the basicmacroeconomic imbalances relating to savings and investment, consumptionand production, and the balance of payments would improve only marginally

in the medium term (1986-91). Even with a constant (i.e., allowing for noincrease in) real per capita consumption, the economy would still requirelarge external aid inflow to support investment and consumption.

1.14 While the ratio of the trade deficit to GDP would be reduced inthe medium term with continued policy reform, the balance of paymentsdeficit and external debt servicing crisis would persist. Given thatmultilateral debt service which is on average well over 50 percent ofexport earnings a year up to 1991 and is not eligible for rescheduling, theeconomy would have no capacity to support an orderly debt service financingeven if all bilateral debt were rescheduled on very soft terms. Because ofthe large non-reschedulable debt service obligations, Somalia faces aserious cash problem over the medium term. An orderly external financingscenario with growth would require a combination of (a) sustained policyreform, (b) large inflow of soft aid including cash grants, and (a)rescheduling of eligible debt service on soft terms.

-4-CHAPTER II

RECENT ECONOMIC DEVELOPMENTS

Production Growth

2.1 The performance of the Somali economy improved with increases inaggregate production in real terms in 1984 and 1985. Somalia does not haveany official national accounts. Available data on gross domestic productsuffer from serious weaknesses. Though specific figures on the growth ofGDP from different sourcesl are not consistent, the overall evidencesuggests a real annual GDP growth of about 3 to 6 percent in 1984 and 1985.

2.2 Data concerning Somalia's national accounts collected largelythrough ad hoc limited surveys, still remain very weak. This is trueespecially for the large livestock sector for which the officialstatistical base is no better than guesstimates, giving rise to implausiblywide year-to-year fluctuations in livestock production and also in GDP.2

The livestock production data used by the Central Statistics Department forGDP estimates are unreliable. The Ministry of Livestock suggests anaverage annual real growth of between 2.5 and 3 percent. Discounting thesevery wide fluctuations in livestock production, estimated growth of GDP inrecent years is shown in Table 2.1. However, specific GDP figures andgrowth rates of real GDP must be viewed with caution since they may besubject to wide margins of error.

1/ The IMP, Somalia: Recent Economic Developments, September 1986, and thetentative estimates by the Central Statistics Department (CSD), Ministryof National Planning, show the following annual rates of growth of realGDP:

1982 1983 1984 1985 1980-84 1981-85IMF 11.2 2.4 2.3 10.2 6.2 6.2CSD 7.1 -16.0 13.5 18.0 2.5 5.0

2/ The CSD's figures show a 41 percent decline in livestock production in1983, 40 percent increase in 1984 and another 21 percent increase in1985. These wide fluctuations are due to an implausible assumption thatthe animal herds suffered the largest death loss in 1983, even largerthan the death loss incurred in worst drought years of 1973 and 1974.

Tablo 2.1

SOMALIA - Annual Growth Rates of GOP kg Sector(At conotint 1977 prices)

Sector Shar*aAM"fif cx of WP)

1989 1981 12 1968 1984 1966 - N

Aricultur Sector 6.4 16.8 10.6 2.6 6 6 7.8 8.7 57.6

Crop Production 8.0 8.6 1.9 -19.2 $.e 88.2 7.4 12.0Livestock 9.6 22.5 18.4 4.8 6.1 2.8 9.7 89.2

Industry Sector 0.4 1.6 1.5 -14.7 -10.9 7.2 -3.1 8.8

Services Sector 9.6 -9.9 7.9 8.1 8.9 4.4 2.7 88.6Govornrent Se rvIc- a1 -Uf 17! 171 -17C -471 -47 T7Othor Services -8.8 1.8 109. 7.9 4.2 5.6 5.9 26.4

GDP-Factor Cost 8.8 4.4 6.5 2.4 8.6 6.8 650 100.0

Source: Annex Table 2.2.

2.3 The shares of the major sectors in GDP are approximately 39percent for livestock, 12 percent for crops, 6 percent for forestry andfisheries, 9 percent for industry and about 34 percent for services.Agriculture (including livestock, crops, forestry and fishery) was themajor source of growth in 1984 with most contribution coming from livestockand crops. Following the drought of 1983, the growth of livestockproduction in 1984 has been higher than and in 1985 close to the long-termannual average noted later.

2.4 Somalia's crop production has increased remarkably for twoconsecutive years -- 1984 and 1985. Further increases in production areexpected in 1986. Improved incentives -- the liberalization ofagricultural prices and marketing -- and favorable weather conditionsaccount for the increased production of crops, particularly foodgrains. Nonotable improvement occurred in the irrigation system, and better seedvarieties and other improved inputs were not available in significantlylarger quantities. However, the land area under crop production increasedfrom 700,000 hectares in 1980 to over 900,000 in 1984 and 1985. Though theproduction statistics (Table 2.2) are subject to errors, the reportedincrease in maize produetion from 235,000 tons in 1983 to 382,000 tons in1985 is almost spectacular. These production increases led to anaccumulation of maize stock and decline in food imports in 1985.

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2.5 The production and acreage of sorghum, the major rainfed crop, didnot show any strong trend increase since 1980, although year-to-yearfluctuations have been considerable. But the increases in the productionof maize -- an irrigated and rainfed crop -- is a major phenomenon in the1980's. The area planted to maize which varied between 100,000 ha to150,000 ha up until 1980, is reported to have increased to 350,000 ha in1984 and 1985. While the reported data indicate considerable yieldincreazes in 1985, maize yields have remained around 0.75 tons per hectarewitho'at any trend increase during 1980-84, reflecting rapid expansion ofma'ze in rainfed areas.

Table 2.2

Somalia: Output of Maior Crops(Metric Tons 000)

1980 1982 1983 1984 1985

Banana 60 79 99 62 59Maize 110 150 235 270 382Pulses 9 59 21 32 39Rice 17 20 3 4 6Sesame 38 57 60 46 100Sorghum 140 235 120 221 226Sugar (Cane) 420 483 450 342 416

Source: Annex Table 7.1.

2.6 The production of pulses and oilseeds (mainly sesame) alsoincreased very significantly in 1984 and 1985 (Table 2.2). In regard tobananas, the most important export crop grown on irrigated land, there hasbeen a notable recovery in the area planted (including new plantings),reflecting improved price Incentives and better availability of inputs fueland tractor services. Although output (and yields) shows modest increasessince 1982, they remain significantly below the levels obtained during theearly 1970s. There was some apparent decline in production in the past twoyears, although trade data do not corroborate this decline. The productionof sugarcane -- an important import-substitution crop grown on irrigatedland -- declined in 1984 due to a shortage of water at the Juba SugarEstate3 due to a combination of the low river water level in the dry seasonand a shortage of fuel for irrigation pumps. Although the scarcity of fuelhas continued, good rains and improved cultivation led to a substantialinsrease in the area under cultivation resulting in a recovery of caneproduction in 1985 (Table 2.2). Other agricultural sector activities suchas forestry increased only slightly (about 2 percent) in 1984 and 1985,while production of fish was unstable with a decline in 1985.

3I With the closure of the Jowhar Sugar Factory for repairs in 1983, Jubais the only sugarcane/sugar production center in Somalia.

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2.7 Manufacturing production, which declined or stagnated in 1983 and1984, showed considerable real growth in 1985, due to improved availabilityof inputs. The growth of manufacturing output growth was stronglyinfluenced by food processing, particularly sugar production at Juba whichis the single largest manufacturing subsector.

Domestic Investment and its Distribution by Sector

2.8 Gross domestic investment in recent years has been maintained ataround 15 percent of GDP, while gross domestic savings remained negative(Table 2.3). However, the level of fixed investment increased to about 14percent of GDP in 1984 and 1985, up from around 9 percent in the early1980s. The changes in stock ( the difference between total and fixedinvestment) in Somalia are more volatile and mainly reflect drought-inducedchanges in livestock raised entirely in the private sector.

Table 2.3

Somalia: Domestic Savints and Investment, 1980-85(Percent of GDP)

1980 1981 1982 1983 1984 1985

Investment 4.8 16.3 15.1 14.2 15.6 15.3Of which:Fixed Investment 9.4 6.8 8.4 11.0 13.9 14.0

Domestic Savings -12.2 6.3 -2.8 -0.7 4.1 -5.5

Memorandum ItemstVolume Indices in:

Per cap resource 100.0 101.3 105.2 103.5 99.2 97.1Per cap GDP 100.0 103.7 106.5 105.6 101.2 105.8Per cap private con 100.0 96.1 100.9 103.2 99.2 96.5

Source: Annex Tables 2.3 and 5.1.

2.9 Around 80 percent of the estimated domestic fixed investment hasbeen undertaken by the public sector; the largest share (over one-third) ofthis investment has been in the agricultural sector, the second largestshare (about 30 percent) has gone to economic infrastructure (energy,water, transport and communications), a declining share (around 12 percent)to manufacturing, and an increasing share (from 6 percent in 1980-81 to 14percent in 1984-85) on education and health (Table 2.4). The generalthrust of public investment strategy has in the 1980s changed in favor ofincreasing concentration on rehabilitation and development ofinfrastructure and support services to encourage the private sector as the

- 10 -

main source of production growth, rather than large investments toestablish and expand public enterprises as in the 1970s. The sectoraldistribution of private fixed investment accounting for around 20 percentof total domestic fixed investment is not known. But it is undertaken inlivestock and crop production, small-scalAmanufacturing, retail trade, amajor part of road transport and almost the whole of residentislconstruction in which the private sector dominates. The progress inliberalization and changes in public investment strategy have so far notresulted in any significant increase in the share of private fixedinvestment over the period 1981-85 for reasons which will be discussed inChapter III. However, the share of private fixed investment in total grossfixed investment has increased from about 15 percent4 in 1976 and 1977 toover 20 percent in 1985. Moreover, including changes in stock raises theshare of private sector in total gross domestic investment.

Table 2.4

Somalia: Share of Public Sector Investment by Sector, 1980-85 (Percent)

1980 1981 1982 1983 1984 1985

Agriculture 33 38 46 39 36 40

Manufacturingand Mining 26 11 8 16 12 10

Energy, Water,Transport andCommunications 24 36 22 28 34 28

Education andHealth 6 6 9 11 14 14

Others 11 9 15 6 4 8

Total 100 100 100 100 100 100

Source: Ministry of Planning, National Development Strategy and Programme,Mogadishu, September, 1985.

Macro-economic Imbalances

2.10 Recent developments do not indicate that the unsustainably largemacro-economic imbalances of the economy are being steadily corrected. Itshould be stated at the outset, however, that because of the seriousweaknesses of the Somali data, possible errors are involved especially inestimated ratios of macro-economic magnitudes to GDP. Data presented inTable 2.5 provide an overview of the external current account balance andthe domestic investment-savings balance for recent years as percent of GDP(the saving-investment balance is also disaggregated into private and

4/ See, Somalia, Ministry of National Planning, Development Strategy andPublic Investment Pro ramme, 1984-86, Mogadishu, September 1983.

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public sectors). An external current account deficit and a domesticinvestment savings gap are normal features of a poor economy in the processof developing with external assistance. In the case of Somalia, these gapsare enormous. requiring large external financing. The current accountdeficit on the balance of payments remains a large proportion of GDP risingto 22 percent in 1985. The apparently low ratio for 1984 (and also 1983)is an aberration because the magnitude of the deficit was grosslyunderstated in local currency by the highly overvalued official exchangera_e which was adjusted in 1985. The gap between domestic investment anddomestic savings remains large, rising to over 21 percent of GDP in 1985.(If the official exchange rate, rather than the trade weighted average ofthe multiple exchange rates, is used for conversion, the ratios of thecurrent account deficit to GDP and the resource gap to GDP for 1985 become12.2 percent and 11.3 percent respectively. But even this soes notindicate a decline in the external imbalance relative to GDP.) This gap isfinanced by foreign savingslaid flows reflectedi in net imports (excess ofimports over exports of goods and non-factor services). Domestic savingshave, in most years, remained negative in both private and public sectors,and external assistance financed part of domestic consumption as well as100 percent of all investment. However, the much larger public dissavingsconstitute the major factor behind the persistently large doniestic andexternal financial imbalances, which we shall discuss later on. Theextremely large investment savings imbalance indicates the gross inadequacyof domestic resource mobilization which combined with still inadequateexternal sector policies resulted in continuing large current accountdeficit on the balance of payments.

2.11 It is to be emphasized that the economy has responded to thechanged policy environment and favorable climate in positive ways throughagricultural growth, lower inflation, reduction of imports and recovery ofexports. However, the effect of these positive developments on the macro-economic imbalances of the economy is still negligible mainly because theimbalances in themselves have been enormous and deeply entrenched to startwith. The following two sections of this chapter will elaborate on theexternal payments situation and the domestic financial situation. Thefinal section provides an overview of how incentives have evolved and towhat extent important distortions are being corrected in recent years.

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Table 2.5

Somaliat Macroeconomic Balances. 1980-85(Percent of GDP)

1980 198j 1982 1983 1984 1985

Foreign Savints

Current A/C Balance -14.2 -8.1 -16.3 -13.6 -10.7 -21e7Net imports(Resource Balance) -17.0 -9.9 -17.9 -14.9 -11.6 -20.8

Private Sector

Gross Dom Inv -2.7 10.9 8.9 5.6 4.8 4.1Fix Inv 1 1.9 1.4 2.2 2.4 3.1 2.8Chg in Stk 2 -4.5 9.5 6.7 3.2 1.8 1.3

Dom Savings -9.1 6.5 -2.2 0.6 10.5 -0.6Inv - Sav 6.4 4.3 11.1 5.0 -5.7 4.8

Public Sector

(coss Dom Inv 7.5 5.4 6.2 8.6 10.8 11.2Fix Inv 7.5 5.4 6.2 8.6 10.8 11.2Chg n Stk 3 -- -- -- -- -- --

Dom Savings -3.1 -0.2 -0.6 -1.4 -6.4 -4.9Current Rev 11.5 11.9 11.2 12.4 6.1 5.4Current Exp 14.6 12.1 11.8 13.7 12.5 10.3

Inv - Sav 10.6 5.6 6.8 10.6 17.2 16.0

Public & Private

Inv - Sav 17.0 9.9 17.9 14.9 11.6 20.8

Memo Item

Share of Gross Dom.Inv. financed byforeign savings (2) 100 94 100 100 96 100

1/ Split between public and private investment is taken from governmentdocument, "Performance of the Somali Economy, 1983", and staffestimates.

2/ Change in stock data primarily refer to livestock. Due to weak database, may include some public sector stock changes.

3/ Included In private change in stocks.

Source: Annex Tables 2.3, 3.1 and 5.1

_ 13 -

Balance of Payments

2.12 The balance of payment situation remained precarious during 1985despite some improvements over 1984. Exports increaeed to US$93 million,and imports fell to US$362 million, leading to an improvement in the tradebalance of US$75 million compared with 1984. Private transfers fell on theother hand, because of the changing employment opportunities in theneighboring oil exporting countries, and the deficit on the current accountwas reduced only by US$21 million. Not capital inflows (including officialtransfers) were moderately higher than in 1984, and the overall balance ofpayments deficit was reduced by some US$50 million from 1984 to 1985. Thisdeficit was financed largely by accumulation of payment arrears in 1984.In 1985, it was financed partly by debt relief (see Table 2.6).

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Tablo 2.6

SOMALI1 - Balance of Payents Summaryv 1901-1986(in millions of US dollars)

1991 1962 1998 1964 1985

Exports, f.o.b. 114 17 101 62 98

Imports, C.I.f. -422 -484 -450 -498 -862

Trade Balance -S8 -847 -849 -844 -269

Non-factor services(not) 9 28 24 -S -8

Resource Balance -299 -324 -325 -847 -275

Interest Poyments -10 -14 -21 -44 -48

Private Transfors(workers' remittance) 64 so 51 72 20

Current Aeo.unt Sol. -245 -268 -295 -S19 -298

Offieial Transfors(net) 159 167 148 174 179

Public Loans (net) 79 128 1N 46 69(disbursements) (98) (181) (16) (106) (114)(rpayments) (-14) (-8) (-7) (-U) (-46)

Other Capitol(inel *rrors andomi s ione) (not) a -a6 -89 -40 -88

Overall Balance -18 -44 -88 -189 -88

Financing 14 44 so 189 88

Central BDnk B8 64 47 18 26of which:Net credit from IMF 30 34 44 -8 82

Com"rcial Bank -20 -20 89 29 -82Arrears - - - 71 -58Debt Roelo - _ - 26 160

Memo Items;

aros reserves asX of total Imports 10 8 4 1 2

Current accountdeficit/GOP (U) -8.1 -12.6 -18.6 -9.8 -12.7

Debt srvice ratio(as X of exports ofgoods and services)accrual basl 20 21 28 166 104cash basis n.e. n.a. n.n. 19 48

Source: Annex Table 8.1

- 15 -

2.13 Exports increased by 50 percent from 1984 to 1985, from US$62million to US$93 million. This was eatirely due to a doubling of livestockexports, from US$33 million to US$66 million. The recovery was due to thegood performance of exports of sheep and goats (Table 2.7). Part of theincrease was the result of a concerted effort to open up now export marketsin Egypt and North Yemen especially for cattle, following the ban on importof Somali cattle in its traditional export market. The devaluation of theSomali Shilling in 1985 along with the introduction of a free market forselling part of foreign exchange earnings from exports is having a positiveeffect on livestock exports. Still cattle exports of 32,000 head in 1985were far below the peak level of 157,p0u in 1982.

Table 2.7

Somalia: Livestock Exports (Thousand Head)

1980 1981 1982 1983 1984 1985

Camels 16 12 12 6 5 6Cattle 89 103 157 38 7 32Goats 734 680 719 557 351 749Sheep 747 658 730 569 350 709

Total Livestock Units* 238 231 285 150 82 197

*Converted at camel-l.2 LU; cattle-0.8 LU; goat-0.1 LU; sheep=0.1 LU)

Source: Somalia, Ministry of Livestock.

There were, however, only minor improvements in other exports in 1985.Banana exports remained at the 1984 level. Exports of incense, and hidesand skins recovered only slightly in 1985. Compared to the number ofanimals slaughtered, the collection rate of hides and skins remains low asprice and marketing remain controlled.

2.14 Total imports in current dollars declined by 10 percent in 1984,and by another 10 percent in 1985 to $362 million. The reduction inoverall imports was entirely due to a substantial decline in foreignexchange imports while the total level of imports under commodity aid andpublic investment program (PIP) in 1985 was not lower than in the previousyear.

- 16 -

Table 2.8

Somalia: Total Imiorts (Current USS millions)

1984 1985

Foreign Exchange Imports 156 111Commodity Aid 110 97(of which oil) (20) (37)PIP Imports 140 154Total Imports 406 362

Sources IMF, Somalia Recent Economic Developments, April 1986; and Bankstaff estimates for 1985.

The decline in foreign exchange imports in 1985 was not the result of anabsolute decline in foreign exchange availability (export earnings, privateremittances plus cash grants), which actually increased somewhat. Itlargely reflected, the impact of price and exchange rate adjustment onprivate sector imports, and some substitution of foreign exchange importsby commodity aid as the latter's composition improved.

2.15 Despite the decline in total foreign exchange imports as well astotal imports, real GDP increased in 1985 because production originatedmainly from the agricultural sector which depends much less on imports thanother sectors.

2.16 The lower imports and the recovory of exports in 1985 contributedto a modest decline in the trade deficit, though it still remained 4 timesthe value of exports. With the decline in private transfers in 1985, theoverall financing requirement, the current account deficit plus loanrepayment obligation, exceeded $400 million in 1984 and $380 million in1985. Aid disbursements in forms of project aid, commodity aid and cashgrants amounted to $280 million in 1984 to over $290 million in 1985 (about$60 per capita). While in 1984, financing of the remaining gap was donelargely through accumulation of arrears, in 1985 this was achieved mainlythrough a debt relief of $150 million and a net credit of $32 million fromthe IMF. Thus the economy depended on large external grants and loans anddebt relief to meet the external financial obligations. Yet, Somaliaaccumulated new payments arrears by the end of 1985.

External Debt

2.17 Somalia's external debt (outstanding and disbursed) has increasedto reach US$1.54 billion as of December 31, 1985 from US$1.35 billion atthe end of 1984. Around 33 percent of this total outstanding debt is owedto multilateral agencies including the International Monetary Fund and theArab Monetary Fund (see Table 2.9; details are shown in Annex Table 4.1).About one-third of this multilateral debt originates from OPEC

- 17 -

institutions. The remaining 64 percent of total external debt is owed todifferent bilaterals. OECD countries including suppliers credits (SACE,Italy) have the largest share (34 percent). OPEC countries includingbilateral agencies (Kuwait Fund and Saudi Fund) have 16 percent, and CPEcountries have another 16 percent. A large part of CPE debt is de factofrozen.

Table 2.9

SOMALIA: External Public Debt Outstanding, end 1985

US $ Z ofMillion Grand Total

Official Creditors:

Multilateral 324 20.9IDA 164 10.6OPEC 113 7.3Other 47 3.0

Bilateral 814 52.7OECD 318 20.6OPEC 253 16.4CPE 243 15.7

Total (excl. IMF/AMF) 1,138 73.6

IMF 142 9.2

AMF 50 3.2

Private Creditors:Suppliers credits 213 14.0

Grand Total 1,543 100.0

Source: Appendix, Table 4.1; Ministry of Finance, Debt Unit.

2.18 Actual debt service payments (excluding IMF) increased from US$3.8million in 1984 to US$26.0 million in 1985. Actual debt service paymentsincluding payments to IMF increased from nearly US$12 million in 1984 toabout US$50 million in 1985, of which US$27 million represented repaymentof principal. Thus, the larger portion of debt service payments are due tothe IMF. Yet, actual payments have remained a small proportion of debtservice obligations (Table 2.10).

- 18 -

Table 2.10

Somalia: Debt Service Oblization, and Actual Payment. In 1984 and 1985(Million US$)

1984 1985Obligations Payments Obligations Payments

Multilateral (excl. IMF) 18 2.2 15 6.1Bilateral (OPEC) 28 0.9 23 19.2Bilateral (OECD) 44 0.7 43 0.7CPEs 12 0.0 13 0.0IMF 8 8.0 26 24.0

Total 112 11.6 120 50.0

Source: Ministry of Finance, Debt Unit, and staff estimates.

2.19 Shortages of foreign exchange in the official market continued tobe a constraint on the Government's debt service capacity in 1985, but alarge cash grant from Saudi Arabia enabled the Government to dischargeoutstanding arrears and current debt service with two bilateral agencies--the Saudi Fund and the Kuwait Fund. Debt service payments to otheragencies were partly financed through purchase of foreign exchange in thefree foreign exchange market (around US$3 million) or settled in localcurrency (around US$2 million).5

2.20 Somalia's debt service arrears increased rapidly from US$31million at the end of 1981 to US$224 million as of December 31, 1984.Around US$98 million of these. arrears were settled in 1985, but anotherUS$46 million in new arrears were incurred in the same period. Table 2.11shows the change in arrears by donor groups.

5/ The Central Government budget shows a debt service for 1985 of So.Sh.1.4 billion, equivalent to about US$26.4 million at an average exchangerate of 53 Sh/US$1.

_ 19 -

Table 2. 11

Change in Arrears, end 84 to and 85(Million US$)

Settled NewArrears Arrears

Multilateral (Excl. IMFIAMF) 12.6 10.3

Bilateral (OPEC) 75.9 16.1

OPEC 11.3 2.5OECD 70.4 0.0CPE 4.2 13.6

IMFIjAMP 0.0 19.4

Total 98.5 46.4

Sources Ministry of Finance, Debt Unit

2.21 Seventy million US dollars in arrears to OECD countries weresettled as part of the 1985 Paris Club agreement. Arrears were alsosettled with certain agencies during 1985 (the African Development Bank,the African Development Fund, the Islamic Development Bank, the Kuwait Fundand the Saudi Fund), but now arrears were built up with other agencies(Arab Fund, OPEC Fund, Arab Monetary Fund, and the IMF). Around US$16million of new arrears were built with CPE countries and OPEC bilaterals.This debt includes frozen debt to CPE countries.

2.22 Dturing 1985, through the Paris Club reschedulings and bilateralarrangements with other official creditors, Somalia received debt relief oncurrent debt service and arrears totalling US$150 million. Bilateralreschedulings arranged at the 1985 Paris Club meeting were finalized in1985 with only two creditors-,France and the U.S. Similar arrangementsarising from the 1985 Paris Club rescheduling were finalized with Italy andthe U.K. in 1986. Long negotiations on interest rates rosulted in thisdelay in formal agreement. The delay with Italy was due to (successful)efforts at converting some of the rescheduled loans into grants. The ParisClub arrangements gave Somalia 10 years maturity and 4 years grace for themajority of debt rescheduled. The interest rates set in bilateralagreements with individual creditors varied between 2 and 12 percent, witha weighted average rate of 4.5 percent per year.

2.23 The position of arrears by donor as of December 31, 1985 is shownin Table 2.12 (for details, see Appendix, Table 4.3). Total outstanding

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arrears as of December 31, 1985 was estimated at US$173.8 million. Closeto three quarters of this is, however, arrears on 'frozen' debt. Thisincludes US$85.6 million owed to CPE countries (mostly to Bulgaria and theUSSR) which are unilaterally 'frosen', with no servicing or formalrescheduling being arranged. Similarly, US$40 million in arrears owed toAbu Dhabi (out of US$44.3 million in arrears to OPEC bilaterals) appears tobe virtually frozen with no rescheduling arrangements.

Table 2.12Arrears

(Million US$)

end-1984 end-1985

Multilateral 20.2 18.4OPEC 19.6 17.6Others 0.6 0.8

Bilateral 189.7 129.9OECD 60.5 0.0OPEC 53.0 44.3CPE 76.2 85.6

IMF/AMF 4.5 25.5

Total 214.4 173.8

Source: Appendix, Table 4.3, Ministry of Finance, Debt Unit.

2.24 The Government could not achieve its objective (as set out in the1985 adjustment program supported with IMF stand-by) of virtuallyeliminating by the end of 1985 all external payments arrears either by cashpayments or through rescheduling arrangements.

2.25 In fact, despite some reduction of outstanding arrears during1985, Somalia's current debt service problem remains extremely difficult.Even excluding the outstanding arrears at the end of 1985, current debtservice obligations during 1986 and 1987 exceed US$150 million per year, orare larger than the sum of annual export earnings and remittances of Somalinationals working abroad. The current burden of annual debt serviceobligation is thus way beyond Somalia's capacity to bear. The current debtservice obligations (excluding arrears) to multilaterals alone amount toover US$40 million in 1986 and $80 million in 1987 (of which the largerportion is owed to IMF).

2.26 The Government requested a further Paris Club rescheduling inearly 1986, but following the Paris Club's standard procedure, creditorsindicated their unwillingness to consider Somalia's request until a Fund-supported program was in place, covering at least the period through theend of 1986. Somalia has also approached various other creditors for debt

- 21 -

relief, but no new debt rescheduling has been arranged. Meanwhile, debtservice obligations to various creditors have not been paid. Therefore,Somalia's arrears at the end of 1986 have increased by over $80 million(contrary to the objective of reduction of arrears stipulated in the 1986stand-by arrangement with the Fund).

Fiscal and Monetary Developments

2.27 Notwithstanding less than comprehensive coverage and accounting ofthe government budget, data in Table 2.13 below indicate that the fiscalsituation improved moderately in 1985 over 1984, although the currentaccount deficit remained very large. The progress is continuing in 1986.Total revenue in nominal terms, after having decreased by 8 percent iti1984, grew by 31 percent in 1985. But this rate of increase was stillsubstantially lower than the rate of inflation. The increase in totalrecurrent expenditure in 1985 (22 percent) was much smaller than in 1984(73 percent).

2.28 However, domestic revenues remain grossly inadequate to financerecurrent government expenditures. Despite wide margins of error inestimates, available data indicate that domestic revenue as a proportion ofGDP in 1984 and 1985 was a record low (5-6 percent) compared to 13-15percent in earlier years. There are several factors contributing to thisproblem. The primary reason has been the valuation of imports for dutiesand taxes (from which comes half of Somalia's domestic revenue) has beencarried out at an artificially low price of foreign exchange which isroughly half of the legal free market rate. Extensive tax evasion and weaktax administrations are also important factors.

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Table 2.18

SOMALIA:. Summary of CentralI Government Financ*. 1981-86(in Mill. of So"ait Shillings)

1981 1982 1988 1984 Prolim 1986*

Domestic Revenue 1 2262.6 2759.8 4252.6 8978.7 5220.0 9401.0

of which Tax Revenue 2967.8 2477.9 U848.6 2979.9 4582.4 8418.0

Recurront Expenditure 1 2295.9 2906.0 4716.0 8140.0 9918.0 15898.0

Curront Balance -32.4 -145.4 -468.5 -4161.8 -4698.9 -6998.0

Dovelopment Expenditure 1424.8 2400.6 1920.0 3181.5 7940.0 12296.0of which:Dovelopmeont Budget 286.8 847.6 498.1 661.5 1872.0 2609.9

Overall Balance -1457.2 -2606.0 -2888.5 -7842.8 -12688.0 -18289.0

Financing 1457.2 2606.0 2388.5 7842.8 12688.0 18269.0

Foreign 1116.2 2780.0 2678.5 4720.8 11698.0 18850.0Loans 081.2 1724.1 1572.5 2797.8 4978.0 99911.0Grants 485.0 1066.0 1106.9 1989.0 620.0 9849.9

Domeatic 841.0 -174.0 -295.0 256.0 1046.0 -81.0Banking System 847.9 -150.0 295.0 2678.0 875.60 -61.0Other -4.0 -24.0 0.0 -8.0 170.0 090

I/ Includes transfer. to and from local governoente.

Source: Annex Tablo 6.1.

- estimate. as of December 1986.

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2.29 As a consequence of an inadequate domostic resource mobilizationin the public sector, the budget deficit in the last few years hascontinued to be large. This deficit was financed mostly from foreigngrants in the form of shillings generated by commodity aid. Currentdeficit increased from So.Sh. 4.1 billion in 1984 to So.Sh. 4.7 billion in1985. In 1984 budgetary support in the form of external grants was So.Sh.2 billion and by 1985 it had jumped to So.Sh. 6.6 billion or about 7percent of GDP. Despite this high level of external budgetary support, theGovernment's net borrowing from the banking system was So.Sh. 2.6 billionin 1984 and So.Sh. 875 million in 1985. (The Government had to recourse tobank borrowing in 1985 because it paid off So.Sh. 1400 million in arrearsit had accumulated in 1984). No net borrowing from the banking system hasbeen made in 1986 primarily because of a 41 percent increase in externalgrants.

2.30 External loans and grants continue to finance fully thedevelopment expenditures undertaken through the Public Investment Program(PIP) which remain outside the budget. (The PIP expenditures have beenincluded in the Table 2.13 to get a better overall estimate of the totalgovernment spending.) The local counterpart requirements of thedevelopment expenditures are included in the budget as 'development budget'and are also financed externally by counterpart funds generated through thecommodity aid program. Table 2.13 indicates that development expenditureshave been large, and increased 66 percent in 1984 and further 150 percentin 1985. In 1986 total development expenditures have increased 55 percentto So.Sh. 12.3 billion or about 48 percent of total (recurrent anddevelopment) expenditures and 80 percent of recurrent expenditures.

2.31 At the same time, recurrent expenditures on social and economicservices have been grossly insufficient. Recurrent budget expenditureshave primarily gone towards meeting rising expenditures on general publicservices (i.e. Defense, Interior) and maintaining an overly large civilservice as will be discussed in Chapter III.

2.32 Recent monetary developments largely reflect the modest budgetaryimprovement in 1985 over 1984. The rate of expansion of domestic creditslowed down to about 18 percent in 1985 from over 82 percent in 1984. Thiswas entirely due to a sharp reduction in credit to the Central Government(see Table 2.14), as Central Bank financing of the budget was reduced fromSo.Sh. 2.6 billion in 1984 to about So.Sh. 0.9 billion in 1985. Credit topublic entities was somewhat higher in 1985 than in 1984, whereas credit tothe private sector was drastically lower -- with only 8 percent increase in1985 compared to 62 percent increase in 1984.

2.33 Broad money (M2), i.e., currency plus demand deposits and timedeposits, increased sharply in 1985 despite the reduction in the rate ofexpansion of domestic credit. Domestic credit expansion only accounted forabout one-third of the budgetary expansion. The large increase in monetary

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liabilities reflects in particular the increase in foreign currencydeposits by the private sector and their revaluation given the rapiddepreciation of the shilling, and the build-up of counterpart funds fromthe comodity aid program. Data available for early months of 1986indicate that monetary expansion may have slowed down to some extent.

2.34 With moderation in the expansion of domestic credit, inflation (asmeasured by Mogadishu Consumer Price Index) slowod down to 38 percent in1985 from 92 percent in 1984. But further progress does not seem to havebeen made in 1986. During 1986, domestic inflation was about 37 percent.However, the share of the private sector in domestic credit declined from39 percent in 1984 to 35 percent in 1985, and was even lower in 1986 (SeeTable 2.14).

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Table 2.14

SOMALIA: fngo and Crodit , 198W(mlill. of So.5h., OngdO Prio)

Items 19 19e IOU 198 1984 19e C .e. 2

For.lin Asnets, Net1 145 72 -441 -28JW -4465 -591U8 -8259

Domestic Credit 8gm 4546 5024 5261 9616 11347 1ismClaims on Govt., Not 1902 22W0 2100 1S65 4J78 5252 6196Claims on PublicEntities 1651 1722 1300 1163 1511 2071 8257Claims on PrivateSector 426 575 1624 2293 8727 4024 4227

Money Supply (MI) 2788 3619 8911 4167 6078 0117 11887Mon y Quasi-Money

(M2) 8081 4866 4995 5849 6678 11938 16111Other Itume, Not 1 648 251 -612 -248 -1797 -6428 -10888

Memo Items

Ratio of M2 to GOP 27.4 22.9 20.8 16.6 10.8 12.8 11.6X Increase of M2 20.2 29.1 14.4 7.1 24.9 78.2 86.8X Incroese In DOMCredit 81.12 17.2 10.5 4.7 82.8 18.0 20.6U Increose InMo4gdishu CPI 59.0 44.6 22.6 86.4 92.1 87.9 87.0

J/Includes valuation adjustomnt.Data for 1966 ore as of September 1986.M2 Includes money supply (currency and demand deposits) and tim deposits.

Source: Annex Tables 6.1 and 9.2.

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Key Performance and Incentive Indicators

2.35 Table 2.15 attempts to provide an overview of some incentiveindicators, in order to show to what extent distortions in the policyframework are being corrected over time. The real effectivo exchange rate(REER) - the nominal effective exchange rate adjusted for the differentialin domestic inflation and partner countries' inflation - applicable toexporters (Table 2.15), has declined moderately but unsteadily since 1980,except for 1984, the year of setback of policy reform. The index of REERdepreciated substantially and rapidly to reach about 60 in mid-1986. Adepreciation of the REER raises the domestic prices of exportables relativeto non-tradables, provides incentives to producers/exporters, and alsoimproves the competitiveness of exportables abroad, and helps to rectifythe balance of payments deficit. Thus, except for 1984, Somalia has beencorrecting the earlier exchange rate distortions and improving exportincentives since 1981, and specially during 1985 and 1986. Somalia needsto sustain a depreciation of the real effective exchange rate to expand anddiversify exports and to encourage import substitution towards reducing thelarge external imbalance. However, because of multiple exchange rates, thereal effective exchange rate relevant for imports has still not movedadequately in the right direction to provide strong incentives to importsavings, domestic production of import substitutes and thus to correctdistortions in the policy framework which we shall discuss in the ne-',chapter.

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tabIl 2 1S

Soeall Keo £conoeic V;riabloe. 910W-a

Incentive Indicatorsttt^ }b"1 192 t3t 19U4 1995 19|6

1. Real Effective Exchongs Rate 1

a. Index 1908 * 1 108 121 96 16 170 98 e1b. Annual Change 21 -21 1J so -45 -84

2. Real Interest Rates p.m.

a. 8-month deposit rate -86 -27 12 -21 -44 -17 -17b. long-term londing rate -t8 -28 -9 -10 -42 -15 -15

8. Ratios of Domestic AgriculturalPriceo to International Pric"

a. Maize 98 142 112 112 168 18s 118b. Bananas 28 so 87 0S 76 SO5. Cotton 22 29 19 26 42 44 -

External Trade Indicators

4. Volumo Index of Malor Exports

a. Livestock 18 97 120 08 84 88 -b. Bananas 1i 97 148 176 1S5 128 -

S. Commodity Terms of Trade

a. Index 1980100 1C8 go 98 120 118 99 -b. Annual Change -4 2 22 -7 -12 -

Notes:

1. Roal Effective Exchange Rate (REER) calculatlons are based on the relative changes In MogadishuCPI and the weighted consumer price Indexes In the partner countrieo, applied to the nominalexchansg rate. Since multiple exchange rates existed In Somali, the nominal effectiveexchange rate applicable to exporters is used for the calculations.

Index of REER a Index of a x Pd

where * u units of SOR per Somali Shilling applicable to exporters.Pd a Mogadishu CPIPf aW Wtghted CPI of partnor countries.

A decroese In the lndex mano depreciation of RER.

2. Real Interest Rates (RIR) are calculated from nominal Interest rates (NIR) adjusted by thechange in the GOP deflator (ODPD), using the formula:

RIR (1+ NIR -1) x 100(r+WD)

S. For relative agricultural price, dometic prices refer to farm level producer prices.International prices for maiz and cotton refer to c.t.f. Import parity prices at Nogadishu,and for ban nas to f.o.b. prices (taken from World Bank, Commoditios Division).

4. Volume Index of exports of livestock is bae d on livestock units exported.

S. Terms of trade Index Is ealculated as the ratio of export price Index by the import priceIndex. In computilng the export price lndex, livestock Is given Of percent weight and bananas20 percent weight In exports, since prices of other exports are not known. In Import priceIndex petroleum has 20 percent woight, and the rest 9S percent. Actual prlce trends are fromSomalis trade data. Price moveonts for bananas, petroleum and other Imports are based onWorld Bank Commoditioe Dlvision.

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2.36 During the same period, the ratio of domestic agricultural pricesto international prices of three major crops -- maize, bananas and cotton(at the official exchange rate) has increased since 1980 indicatingimprovement of incentives through liberalization of pricing and marketingand/or increases in producer prices (Table 2.15). Producers' prices ofbananas at the farm level have been gradually raised from 22 percent to 75percent of international f.o.b. prices between 1980 and 1985. Consideringthe relative quality of Somali bananas the level of producer price seems tobe a good indicator of production and export incentives. Producer pricesof cotton have been raised from 22 percent in 1980 to 44 percent in 1985;but the ratio is still too low to provide adequate production incentives,while imports continue to meet domestic demand. Producers' price of maizehas gone much above the c.i.f. Mogadishu import price in 1984 and 1985indicating that maize is not competitive as import-substitute at theofficial exchange rate. Stocks of local maize are piling up while consumersare attracted by the price and availability of imported wheat - a problemwhich should be tackled through appropriate pricing and management of foodaid imports. On the other hand, at the average exchange rate applicable toexports (So. Sh. 115-$1) in 1986, Somali maize cannot enter export markets.

2.37 Unlike the improvement in production and export incentives,Somalia has not made significant progress towards making real interestrates positive. Both the short-term deposit rate and the long-term lendingrate remain negative, although it may be noted that except for 1984, therehas been some movement in the right direction. The main problem has beenthe failure to reduce the rate of inflation sufficiently, so that moderatenominal interest rate adjustments could ensure positive real interest.Negative real interest rates create disincentives to the supply of savingsfor credit creation and encourage capital flight out of the country orconversion into real assets (goods or real estate) that appreciate withinflation. On the other hand, demand for credit outstrips supply when itis available at negative real interest rates. Allocation of credit becomesarbitrary, based on criteria other than efficiency, and results ininefficient ullocatio3 of resources.

2.38 The external trade indicators partly or largely reflect the effectof external factors, rather than domestic policies. It is worth notingthat Somalia has suffered a significant adverse movement (a fall of nearly20 percent) in its commodity terms of trade in 1984 and 1985, although itdid not suffer any terms of trade loss during 1980-1983 (Table 2.15). Thevolume of exports of livestock (Somalia's main export) suffered a seiriousdecline since 1983 due to a ban by the principal importing countryinitially on all Somali live animals, and later only on cattle. Somerecovery was made in 1985 from the depressed level of 1984. Banana exportskept increasing, although the last two years saw some slackening. Somaliahas no mentionable exports of manufactures.

2.39 In summary, the past two years witnessed some growth in real GDP--the effect of improved incentives and good weather. There was modestimprovement in the balance of payments as livestock exports began torecover and import-substitution in foodgrains made some progress. TheGovernment's program of policy reform suiported by generous external aid

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flows made this possible. The improvement in the external current accountis due considerably to the large debt relief as well as the slightly largerforoign aid obtained in 1985. Still, new payments arrears were accumulatedin 1985. There was modest improvement in the budgetary situation asdomestic revenue made some recovery. Here again, the improvemert Is dueconsiderably to the large amounts of counterpart funds mada available tothe budget through the commodity aid program. Thus, the modestimprovements in the balance of payments and the budget are much toodependent on large external aid which has not yet been matched by adequatedomestic structural adjustment effort. Imports are still about four timesexports despite some recovery in exports. Domestic consumption is stilllarger than gross domestic product. Public savings continue to be negativewith domestic revenue covering only 50 percent of the recurrent budget.Thus Somalia's balance of payments and budgetary crisis still remainsserious, requiring very high levels of external financing which would notbe sustainable unless further policy adjustments are made to boost exportearnings and domestic resource mobilization.

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CHAPTER III

PROGRESS OF POLICY REFORM AND REMAINING ISSUES

3.1 Since the first Consultative Group meeting in 1983, the Governmentof Somalia has adopted an agenda for policy reform. Reinforced by theGovernment's 1985 adjustment program under an IMF stand-by, the reformprogram aimed at stabilization and output growth with a sustaiinable balanceof payments, and included measures for improvement of macro-economicmanagement through fiscal and monetary policies, liberalization of price,trade and exchange rate regimes, unification of the exchange rate,incentives for the private sector, reform of public enterprises, reductionin public employment and improvement of the quality of public investmentprogram (PIP).

3.2 The previous World Bank economic report congratulated theGovernment for the bold reforms already undertaken for improving resourceallocation and fostering a market-oriented economy, but noted that thefundamental problems facing the economy -- the huge resource (savings-investment and external trade) gap emanating from a level of consumptionexceeding domestic production, high import dependence contrasting withstagnating exports and low productivity of investments arising fromdeficiencies in public expenditure management and resource allocation --cannot be resolved in a year or two. The unfinished agenda of the reformprogram -- adjustment measures for macro-economic and demand management andpolicy reforms to augment domestic production need to be pursued by theGovernment over a protracted period during which it will require generousexternal aid flows for resumption of economic growth with a sustainablebalance of payments.

3.3 The report recommended -

progress to full liberalization of trade and prices;unification and maintenance of the exchange rate at a market-determined level to encourage exports and efficient import-substitution, attract remittances, restrain demand forimports, and help improve use of foreign exchange resources;

improved incentives and legal framework to encourage theprivate sector reform of public enterprises to improveefficiency of resource use, and to reduce the burden on thebudget or the economy;

strong fiscal efforts to raise domestic revenue and improvecost recovery;

improved financial discipline and expenditure control throughmore transparent budgeting and enforcement of budgetaryceiling;

restraint on monetary expansion;

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improvement of the quality of PIP through use of economic andfinancial rates of return in project selection; making PIP thesole authority for project comuitments and expenditure;expansion of the 'development budget' into a full capitalbudget including both domestically and externally financedexpenditures; explicit consideration of recurring costsarising from development projects and how these will befinanced; preparation of a medium-term financing plan forpublic (investment and recurrent) expenditure and anticipatedresource availability from domestic and external sources;confining the size of PIP consistent with resourceavailability and the need for recurrent cost outlays;

3.4 The previous chapter has shown in broad terms that Somalia'sperformance in implementation of adjustment policies in recent years hasbeen one of modest but unsteady progress in stabilizing the economy andnarrowing the external deficit towards a sustainable level, and slow anduneven progress towards correcting distortions and improving incentives andresource allocation for promoting output growth. The following paragraphsattempt a somewhat more extended review of Somalia's policy performance andweaknesses in three major areas: (a) liberalization, incentives, andpromotion of production; (b) exchange rate regime; and (c) fiscal policyand public expenditure management. Since these issues concern the mainprerequisites for macro-adjustment and improvement of resource mobilizationand allocation, this assessment will help in identifying important policymeasures for sustaining growth over the medium term.

A. Liberalization and Incentives to Promote Production

3.5 Agricultural pricing, marketing and exports. The Government hasliberalized pricing and domestic marketing of most agricultural crops,particularly cereals, and reduced the role of public agricultural marketingagencies such as the Agricultural Development Corporation (ADC). It haseliminated virtually all quantitative restrictions and controls on exportsand imports since early 1985. Barring a very few essential commodities, ithas dismantled all price controls. It has introduced auction systems forsales of some commodities imported under commodity aid programs, and thusmodified earlier underpricing of concessional imports by the NationalAgency for Trade (ENC). It has substantially devalued the officialexchange rate and has introduced a free floating exchange rate market inwhich exporters can trade 50 percent of their export earnings. Theexporter in late 1986 got an average of about So.Sh. 112 for every dollarof export earnings. The devaluation of the shilling and the liberalizationof agricultural pricing and marketing have increasingly broughtagricultural prices in line with world prices and are providing strongincentives for traditional exports and import-substitution in crops(especially grains), and constitute the Government's major policyachievement in the recent past. Moreover, in order to augment production,the Government has transferred land of former state farms to settlements ofprivate farmers.

3.6 However, there are still some important areas of activity inpricing and marketing of agricultural outputs and inputs which remain to beliberalized from public control or monopoly in order to provide incentives

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for export expansion through the participation of private operators. Onesuch area is trade in hides and skins, and frankincense and myrrh which canpotentially make a significant contribution towards increasing earningsfrom Somalia's very narrow export base. But at present the export of hidesand skins requives prior approval. The Goverment's Hides and Skins Agency(HASA) monopolizes the collection, wholesaling and exporting of hides andskins. This has prevented some private companies from exporting hides andskins and finishetd leather. Also the imposition of unacceptably lowpurchase prices of hides and skins has resulted in large quantitiesdisappearing into unofficial markets leaving insufficient supplies for thestate-owned and private tanneries. The result is a direct loss of foreignexchange to Somalia. Similarly, exports of frankincense and myrrh aremonopolized by government-sponsored cooperatives to the detriment of exportexpansion. Under the Agricultural Sector Adjustment Program (ASAP) fromIDA, the Government has agreed to a study of domestic and export marketingof hides and skins and to reach agreement with IDA on the implementation ofthe study's recommendations.

3.7 Marketing and export of binanas is another important activitywhich remains to be liberalized. While the joint venture company(Somalfruit) responded to improved incentives and provided better inputsand services to expand area under bananas, its export monopoly is reducingthe potential of expanded private sector participation to augment-roduction and exports.

3.8 The Government's agricultural input supply agencies have continuedto heavily subsidize prices. In particular, ONAT (the tractor hire serviceagency) is providing tractor services at much below full costs, thushampering adjustment and constituting a barrier to entry of privateoperators in tractor hire services. Also land rights and tenure remain tobe well-defined to improve conditions for private investment inagriculture.

3.9 Import regime. With respect to importation, only alcohol,tobacco, petroleum, medicines, explosives, precious metals and minerals aresubject to prior approval. There is government control on petroleumimporting, pricing and distribution (through Somalpetrol) which ishindering necessary adjustments in the economy. The Government hasrecently raised the retail prices of some petroleum products to aboutimport parity levels, and has allowed the private sector to import dieseloil. However, the Government has not decontrolled prices, for allocationto be determined by the market; the price increases made by the Governmentto reach import parity have not been large or applied uniformly to allusers to eliminate the fuel shortage that is hampering the productivesectors of the economy. The distribution system is still a publicmonopoly, and only a few private entities have actually been able to importdiesel oil. No private import of gasolene or kerosene is allowed becausethe Government has not decontrolled petroleum prices and has notliberalized marketing and distribution.

I

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3.10 While all other products are supposed to be freely importable, theMinistry of Commerce still has control over import applications. Inapproving applications, the Ministry claims that it takes interests ofdomestic producers into account. Imports are permitted only if domesticsupply is inadequate to meet demand; thus, producers of urea, soap, softdrinks, processed foods etc. are contacted by the Ministry to ascertainwhat local production is likely to be, and to decide how much could beimported. The protective effect of this practice is difficult to evaluate,and it is likely that it plays a major role in keeping out some competingimports.

3.11 Import duties comprising of customs and fiscal duties range from4Z to 700%. Luxury goods like toiletries, and alcohol, are charged thehighest duties. Capital goods and some recurrent inputs are exempt, butthis depends on administrative discretion. Goods that an average urbanconsumer needs are charged duties of 30-50%, though some items (softdrinks, soaps, garments) are in higher brackets to protect domesticproduction. The protective effect of tariffs is, however, diluted by thelow rate of exchange used for tariff purposes, evasion of import duties andsmuggling. In some products, the incidence of smuggling is so high(cigarettes, garments, pots and pans) that neither restrictions (notedabove) nor tariffs have much protective impact.

3.12 The net protective impact of import duties (and supplementalcharges), together with other Government policies can be measured by theeffective rate of protection (ERP).1 Recent studies 2 indicate that thereis a wide dispersion of ERP's resulting from the patchwork combination ofprotective tariffs, sporadic access to subsidized foreign exchange,undervaluation of imported inputs, partial exemption from tariffs onimports and price controls on output. Such a diverse range of protection,among and within subsectors, provides wide ranges of differentialincentives for different activities and firms resulting in a substantialmisallocation of resources. Incentives should be equal among activities

1/ The ratio focuses on the protection an enterprise receives for itsvalue-added (revenue from sales of tradeable outputs minus costs oftradeable inputs). In other words, it takes into account not only theeffects of policy on revenue from sales, but also the effects of policyon inputs to production. ERP is the ratio of value-added in marketprices to value-added in economic (world) prices. A positive ERPindicates that the firm is receiving a net positive protection from thecombination of policies influencing the costs of material inputs and ofsales revenue. Likewise, a negative value indicates that the firm isreceiving a net disincentive. An infinite ERP means that the value-added at economic (world) prices is negative. In other words, theforeign exchange cost of manufacturing a product domestically exceedsthe foreign exchange cost of importing the finished product: thecountry is giving up more foreign exchange to manufacture a product thanit would to import it as a finished good.

2/ Quantitative Analysis of Incentives and Disincentives for Expansion ofIndustrial Output and Employment in Somalia, Harvard Institute forInternational Development, July 1985. Also World Bank, Somalia -Industry Sector Report (forthcoming)

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and for individual firms to ensure that investments are attracted intolines of production that earn or save the maximum amount of fore'ignexchange.

3.13 There is a strong case for a thorough reform of the import regimein Somalia. The present structure of import tariffs is largely geared togenerating revenue. It is very complicated, allows for arbitrary use ofdiscretionary powers and is irrational from the viewpoint of allocatingresources efficiently. The regime needs to be simplified and made moretransparent to minimize or eliminate the use of discretionary powers.Protection should be more uniform among activities (except for luxuries andundesirable items) and fairly low to ensure that resources are allocated t.othe most efficient uses and there is no differential in incentives. Thesechanges can probably be made with little loss in revenue to the exchequerand also little dislocation because the industrial sector, especially theprivate sector, is very small. There is an opportunity to lay thefoundation for the future development of an efficient private industrialsector.

3.14 Price control. Most price controls have been dismantled, exceptfor some items produced or handled by public enterprises. Theseenterprises are, however, a large part of the economy, especially of theindustrial sector. At least some public industrial enterprises have tosell their production at Government-set prices. In some cases, forinstance cigarettes and pasta, they are below C.I.F. levels. The Cigaretteand Match Factory is the only enterprise legally entitled to import andproduce cigarettes and matches in Somalia, although ease of smugglingreduce the value of this monopoly position. The low ex-factory price ofcigarettes has clearly contributed to discouraging the company fromexpanding output by buying additional inputs at the free market rate. As aresult, capacity utilization is very low and 701 of domestic demand issupplied by smuggled imports even though there is apparently consumerpreference for the domestic product. The state Wheat-Flour and Pastafactory enjoys a privileged position in the distribution of wheat, importedunder food aid arrangements, at a price based on the official exchangerate. This is an obvious incentive to the factory. However, thisadvantage is outweighed by controlled low sales price. As a result, thepasta factory is discouraged from expanding output and private pasta makersare reticent to enter the market. Other industrial enterprises, accordingto the Ministry of Industry and Commerce, are supposed to set output pricesto cover costs and provide a suitable return on investment.

3.15 Differential incentives are enjoyed by firms depending on accessto the official or parallel markets, resulting in an inefficient allocationof resources and an adverse effect on business activity, production andexports. The remaining price controls should be lifted from pub'licenterprises to allow competition in production and determination of pricesby the market forces. There will undoubtedly be a net gain in efficiencyand foreign exchange. For example, Somalia has an opportunity to developthe leather industry for export based on a comparative advantage.

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Credit, and Private Sector Promotion

3.16 Since 1981, as part of a strategy to promoto private sectoractivity Somalia has made a deliberate effort to curtail credit to publicenterprises and make it available to the private seator. Between 1980 and1984, the private sector increased its share of total credit outstandingfrom 11 to 391, whereas parastatals decreased their share from 401 to 161(Table 2.14). This is a welcome development after many years during whichthe Government crowded out the private sector from access to credit. Evennow the Government still retains a total of 612 of credits outstanding,considerably higher than the 30% in rneighboring Kenya. Also thoGovernmant0s share again increased to 35 percent in 1985. This share hasto docrease further to facilitate long-term sustained development of theprivate sector. Furthermore, allocation of credit to the privato sector isnot based on instrinsic creditworthiness of the borrower or the project andbanking services are generally slow and poor. A beginning is reportedlybeing made to approve credit to new enterprises on the basis of technicalassessment of proposals. In any case, in the present economic environment,most (an increasing proportion) of the private sector credit is used fortrade rather than agriculture or industry. This is partly a directconsequence of liberal import and foreign exchange policies without anaccompanying appropriate interest rate policy and a government monopoly inbanking services. Interest rates, like the foreign exchange rate should bedetemneind by competitive market forces. The Government should movetowards positive real interest rates and grant charters to encouragecompetition in commercial banking services. Breaking the Government'sbanking monopoly and changing interest rate policy would help the privatesector get access to credit and improved services, result in a betterallocation of resources, and go a long way in promoting private sectoractivity in agriculture and industry.

3.17 Public Enterprise Reform. The unsatisfactory performanee ofpublic enterprises engaged in agro-industrial or manufacturing productioncontinue to result in a drain on the public finances or the economy. Mostof the enterprises operate at very low capacities, and due to operatinglosses, are unable to pay taxes to the Government or meet their ownfinancial needs, and rely heavily on increased bank borrowing. Improvementof operating efficiency in public enterprises which constitute the majorpart of the industry sector and were built with large external financing,is essential for Somalia's future economic and industrial growth. Althoughthe Government has, since 1984, been committed to the reform of publicenterprisec, the progress has been very slow. Specifically, the Governmentagreed to assign individual public enterprises into three categories; thosewhich are unviable and to be phased out of operation; those which will bedivested or formed into joint ventures; and those to be retained in thepublic sector with neoded rehabilitation and restructuring within animproved legal framework with greater enterprise autonomy. But actualreform measures, even feasibility studies to determine viability ofindividual enterprises, are yet to be undertaken.

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B. Exchange Rate Regime

Background

3.18 Somalia undertook a major reform of the exchange rate system atthe start of 1985. As part of a major adjustment program adopted in 1985under a new IMF Stand-by Agreement, in the formulation of which Bank staffhad also been closely involved, the official exchange rate was devalued by38.5 percent to So.Sh. 36 to the dollar on January 1, 1985, and a freeforeign exchange market was set up to handle most private transactions.This was accompanied by the lifting of most quantitative controls onexports and imports and a virtual dismantling of the pervasive apparatus ofprice controls.

3.19 The official market was fed by aid, other government receipts anda portion of (35 percent in 1985 and 50 percent in 1986) private exportearnings. It handled all debt transactions, military imports, petroleumimports and diplomatic expenditures. The private market was supplied bythe retained portion of export earnings, and private remittances, andhandled all private imports, capital transfers, and some pubiic enterpriseimports. There was also a small third market for foreign exchangeadministered by the Commercial and Savings Bank, used mainly for touristreceipts, overseas travel and education expenditures and imports brought inunder aid-financed Commodity Import Programs (CIPs), the main source ofintermediate inputs to Somalia's productive sectors. It was anticipatedthat the exchange rates would be unified (at a market-determined rate) byend-19859 following a progressive monthly devaluation of the official rateand a gradual transfer of items from the official to the free market. TheCommercial Bank rate, set initially at So.Sh. 84 to the dollar (when thefree market rate was So.Sh. 89), was supposed to change in line with thefree market rate until the unification of all rates was achieved.

3.20 In any event, only some elements of this policy package wereimplemented in 1985. Monetary and fiscal targets could not be met andinflation was higher than expected. The Stand-by was suspended as Somaliaalso fell into arrears with the IMF. The devaluation of the officialexchange rate was slowed down, retarding the unification of the foreignexchange market as the free market rate depreciated. The Commercial Bankrate was not adjusted, and was still at So.Sh. 84 per dollar in late 1986.No transactions were transferred from the official to the free market.

3.21 The Stand-by Agreement was renewed in early 1986 under a revisedtimetable. The surrender requirement of private export receipts at theofficial exchange rate was raised from 35 percent to 50 percent with theremainder to be sold at the free market rate. The official rate wasdevalued from So.Sh. 42.5 to the dollar in December 1985 to So.Sh. 54.5 inJanuary 1986, and was envisaged to depreciate by So.Sh. 4 per month so asto reach parity with the free market rate by end-1986. The commercial bankrate was to be adjusted every 10 days in line with the free market rate.

3.22 By mid-1986, slippages again took place. The rate of inflationcontinued to exceed projections, and the official rate (at So.Sh. 91 * $1)

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by October was still only about 68 percent of the free market rate. Thecommercial bank rate remained unchanged. The interest rate remainednegative in real terms (the commercial bank overdraft rate was 15-20percent while prices were rising at nearly 40 percent per annum).

3.23 Under World Bank initiative, bost of the Agricultural SectorAdjustment Program (ASAP) credit of $70 million3 is being channelledthrough an exchange auction, which acts as a 'wholesale' market for foreignexchange usable for essential imports only. The Commercial Bank rate hasbeen eliminated, while the free market continues to function, rather like a'retail' foreign exchange market. Bids for the auction can be a minimum of$5,000 and a maximum of $200,000. Both public and private enterprises(except for Somalpetrol) as well as individuals can participate in theauction, which can finance all imports except for military equipment andluxury goods. The first auction on was on September 1, 1986, followed byothers after 15-day intervals. At each of the first four auctions, $2.3 m.was offered. Since the amount was quite large, and the permissible importitems were restricted,4 the auction rate was considerably lower than thefree market rate. A broadening of the auction market with additionalsupply of funds from Somalia's own resources as well as enlargement of thelist of importables will give a more realistic price of foreign exchangeand conceivably provide the basis for unifying the exchange rate.

Evolution of Exchange Rates

3.24 Table 3.1 shows the evolution of the various exchange rates inSomalia. The parallel market rate at end-1984 is also shown forcomparison; this market almost disappeared when the free market wasintroduced, since the latter fulfilled all its functions more convenientlyand legally.5

3.25 The free market value of the shilling declined fairly steadily6

through June 1986. However, for the whole of 1985, the depreciation of 29percent was close to the rate of inflation. In 1986, the rate ofdepreciation (about 66 percent at an annualized rate) was considerablyhigher than the rate of inflation (37 percent p.a.).

I/ Made up of $30 m. from IDA, $32.6 m. from the Special Facility for Sub-Saharan Africa, and $7.4 m. from UK grant.

4/ For the first three auctions, construction materials for urban housingwere also on the negative list.

5/ According to Somali authorities, a tiny parallel market still exists forillegal (contraband) transactions, but its rates are practically thesame as the free market rate (or 1-2 shillings lower).

61 A regression line fitted to 50 observations of 10-day average rates fromJanuary 1, 1985 to end-Hay, 1986, 'explains' 86 percent of the variationin the rate. The mean value of the rate is 110.4, with a standarddeviation of 20.0.

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Table 8.1

SOMALIA - Exchanpe Rat.. Deamler 1984 - October 1988(o. hSb. per UtS. dollar at end-period)

Official Rates Fre Market Rates Ratio ofOfficial Parallel Free toContral Com mrcial Free Market Auction Market OfficialBank Bank Rate Market* Rate Rates

1904 Dec. 26.9 - - - 890-100 8.1-8.81965 Jan. 88.0 68.6 - - - 2.61085 March 87.0 84.0 91.4 - - 2.51985 June 40.6 84.0 97.8 - - 2.41985 Sept. 40.6 84.0 199.7 - - 2.61985 Dec. 42.5 84.0 114.7 - - 2.7

1986 Jan. 64.5 84.8 114.8 - - 2.116O6 Feb. 58.5 84.8 122.9 - - 2.11066 March 82.5 84.8 188.8 - - 2.21966 April 66.5 84.8 149.0 - - 2.21906 May 70.5 84.8 162.9 - - 2.21086 June 74.5 84.8 152.8 - - 2.01066 July 76.5 84.8 157.0 - - 2.01066 Aug. 82.5 84.8 186.9 - - 1.71998 Sept. 86.6 64.8 134.0 195 - 1.61906 Oct. 90.6 64.3 184.0 96 - 1.t

sAverage of the clearing rates of two auctions per month.

Source: Co>mercial banks.

3.26 The free market rate differs by So.Sh. 2-3 from buyer to buyer,depending on the amount involved (larger buyers get better rates). Thedaily fluctuation can be quite substantial: in 10 days of early June,1986, for instance, they ranged from 0.5 percent to 4.2 percent (it ispossible, however, that instability had increased since 1985).Nevertheless, the month-by-month stability of the rate during 1985 wasremarkable, in view of the fact that the free market was so new, relativelythin (about $2.6 m. per month in early 1985, about $4.8 m. per month inlate 1985 and the same in early 1986) and subject to seasonal flu^tuationin the supply of foreign currency (livestock exports are affected by the'pilgrimage season') and its demand (which also varies, depending on needto import food privately as food aid disbursements fluctuate).

3.27 The main transactors, some 100 large livestock exporters and anunknown number of overseas remitters on the supply si6e, and some 30 large

IL 39 -

private traders on the demand side, thus showed an impressive ability(a) to smoothen out cycles in supply and demand, and (b) to match thedecline in the domestic purchasing power of the shilling. Th thinness ofthe market (as measured by the small member of traders on supply and demandside) did not appear to hamper the flow of information or the formation ofexpectations of tho main actors. However, the faster rate of depreciationin 1986 seemed to reflect the entry of other influences, to which referenceis made below.

Operation of the Free Foreign Exchange Market

3.28 The free market is fed by the retained portion of private exportreceipts and remittances from abroad: these are channelled through twoseparate accounts (export account and external account). Export accountscan only be used (by the exporter or'anyone else) for payments forlegitimate imports of goods and services, by transferring the money to animport account. External accounts are supplied and used on a Ono questionsasked* basis with foreign exchange from overseas residents or Somalitraders. These holdings can be used either for Imports of commodities orfor transfer of capital overseas.

3.29 The external account market provides for three different types oftransactions besides transferring remittances to Somalia. First, sinceexporters have to surrender half their foreign exchange at the officialrate, they have an incentive to underinvoice their exports and bring themoney via external accounts, so evading the penalty. Second, since capitalcan be transferred abroad freely by anyone holding an external account (itrequires US$1,000 to open such an account) who buys exchange from anotherexternal account holder, this submarket has taken over the capital flightfunction of the parallel market. Third, since real interest rates continueto be negative in Somalia, the external account can be profitably used toremit capital overseas, not only for long-term capital flight, but also forspeculation against the Somali shilling.

3.30 The depreciation of the shilling has been led by the externalaccount submarket, where the value of the shilling is slightly lower thanin the export/import account market.7 It is reasonable to believe (asindeed the Somali authorities do) that the recent pressures on the value ofthe shilling have been fuelled, not so much by a change in the underlyingfundamentals (inflation, export performance, etc. which are marginallybetter in 1986), as by capital flight and/or profitable speculation. It islikely that a self-reinforcing speculative run on the shilling has built upsince around February, 1986, for reasons which are not apparent. It isthis run which the auction market has successfully thwarted.

3.31 In 1985, the imports of commodities financed by the free marketcme to $42.9 million. Of this, food, beverages and tobacco accounted for40 percent, construction materials for 33 percent, transport equipment

7/ Ir January-May 1986, of the total of $21.7 m. worth of transactions inthe free market, $11.9 m. or 55 percent was sold from the externalaccounts, $2.6 m. or 12 percent from export accounts and $7.1 m. or 33percent from import accounts (the last two only being usable forimports).

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(largely passenger cars) for 12 percent, and industrial inputs (rawmaterials, machinery and spares) accounted for only 17 percent. Thus, theliberalization of imports and foreign exchange led predominantly to themeeting of affluent consumer and urban construction demands rather than toincreasing the use of installetd industrial capacity. In part, industrialenterprises preferred to wait for much cheaper (at the Commercial Bankrate) allocations of inputs under CIPs. However, this still left a lot ofunutilised capacity: the reluctance;to resort to the free market appearsto signify the inability to compete ft those prices.

Effects of the Exchante Rate System

3.32 The complex system of exchange rates in 1985-86 has had a mixtureof beneficial and harmful qffects. The beneficial effects have been thatthe overall move (however halting) towards a market-determined rate hashelped exporters8 (except for hides and skins producers, whose prices arecontrolled by HASA), reduced administrative control over a section of theimport market and virtually eliminated the parallel market.

3.33 The harmful effects have arisen from the half-hearted andcomplicated way in which the liberalization has taken place. The fact thatsome inputs are available at highly subsidized exchange rates while othershave to be bought at the market rate creates competitive distortionsbetween firms with differential access to CIPs. Many firms use bothmarkets, and so base their internal allocative decisions on distortedsignals. The 50 percent surrender requirement imposed on exporters hasinduced underinvoicing 9 of exports. As a result, the government losesrevenue and local producers face a reduction of protective tariffs as notedearlier. The external account system, in combination with domesticinflation and negative real interest rates on deposits has permittedcapital flight (though whether it has led to more flight than with aparallel market is unknown) and speculation against the shilling. Theconsequent fall in the value of the shilling, exceeding its 'true' level,has probably had undesirable allocative effects on the economy.

3.34 The fall in the free market value of the shilling has beeninfluenced largely by domestic credit expansion to finance budget deficitwith consequent high inflation. A successful move towards unification ofthe exchange rate and its maintenance at a market-determined but reasonablystable level calls for more fundamental changes to effect rigorous fiscaland monetary restraint and dampen inflation, in which the governmentlargely failed in the recent past.

3.35 Finally, the liberalized system has not yet achieved an activationof idle capacity and greater dynamism in the Somalia industrial sector.

8/ Who during October 1986, got on average about So.Sh. 112 to a dollar;(1/2 90 + 1/2 134).

9/ A calculation by the IMF from partner country trade date shows that, in1984, Somali exports were valued at $62 million by Somalia and $123million by importers. The difference of $61 million as large asdeclared exports, was presumably transferred abroad for capital flightor remittance via the parallel market.

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This is not however, the fault of the free market. It results partly fromthe inherent uncompetitiveness of much of the industrial sector and partlyfrom the ineffective protective system mentioned earlier. In the end, theexchange rate system by itself will not solve the problems which afflictSomali manufacturings a complete restructuring and upgrading of a muchsmaller industrial sector will be necessary, as indicated in the earliersection.

C. Fiscal Policy and Public Expenditure Program

3.36 Despite the Government's effort to raise domestic revenues duringthe last two years, the current budget deficit remains large. Publicsector resource mobilization and public expenditure program are two majorissues for Somalia. The continuing large public dissavings are thwartingcorrection of the domestic financial Imbalance and the weaknesses in theexpenditure program are undermining the potential productivity of publicinvestment.

3.37 The serious imbalance in Somalia's current budget since 1984 hasbeen a result of slow growth in domestic revenues and a continued expansionin government expenditures'. Rapid inflation in the economy has raised thecost of government programs and services thereby raising budgetaryexpenditures. Domestic revenues, on the other hand, have lagged behindexpenditures. The result has been an increasing budget deficit and afiscal crisis. Overall CPI increased 166 percent from 1983 to 1985. AsTable 3.2 below indicates total expenditures from 1983 to 1985 rose innominal terms by 170 percent and recurrent expenditures by 110 percent, butthe increase in domestic revenues was only 22 percent. In 1986 revenuesincreased considerably but so did expenditures. The government bankborrowing rose sharply (9 times) in 1984 over 1983 to finance the budgetgap. Although recourse to bank financing was much reduced in 1985 and hasbeen zero in 1986 due to increasingly larger availability of CIPcounterpart fundts, adequate fiscal discipline was not achieved.

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Table 3.2

SOMALIA - Nominal Indices of Revenue and Expenditures

1983 1984 1985 1986

Domestic Revenue 100 94 122 221of which: Tax Revenue 100 86 133 243

Total Espenditures 100 170 270 387of which Recurrent Exp. 100 173 210 326

Current Account Deficit 100 897 1013 1293

Overall Deficit 100 307 532 767

Financing 100 307 532 767of which: Budgetary Grants 100 179 598 845

Bank Financing 100 872 296 -21

Mmorandum Item

CPI 100 192 266 364

Source: Table 2.13 and data provided by Somali authorities.

The difference in the speed of adjustment of domestic revenues andexpenditures in the face of rapid inflation has been the greatest budgetarydestabilizing factor in the last couple of years. Bank financing of budgetdeficit, despite large budgetary grants is undermining the stabilizationprogram.

3.38 Public Sector Resource Mobilization. Notwithstanding theGovernment's recent effort to raise tax and non-tax revenue, domesticrevenues grew less rapidly than current price GDP, ..ndicating a lowelasticity of tax,revenues (0.65).

3.39 There are many factors contributing to the lagging growth ofrevenues. The primary reason has been the Government's import tax policy.About 50 percent of domestic revenue is derived from taxes on merchandise

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imports; however, imports are valued for import duty purposes at theofficial exchange rate instead of the legal free market exchange rate. Therise in the price of a dollar in the free market increased the valueimports but not the import tax base. Consequently in 1985 the import taxeswere about half of what they could have been.10

3.40 Rapid inflation in the last few years has eroded revenues fromdomestic indirect taxes because tax rates were levied on a unit base.Excise duties on industrial output were finally changed to an ad valorembasis in June 1985. A 5 percent sales tax was introduced at the wholesalelevel and on the final output of public enterprises. Revenues from excisetaxes doubled in 1985 over 1984; however, the increase could not be largedue to the low level and sluggish growth of industrial production.

3.41 Taxes on wage and non-wage income have lagged behind inflation dueto tax avoidance. Whereas the Consumer Price Index increased four-foldbetween 1981 and 1985 income tax revenues only doubled. In the publicsector, wage incomes did not keep pace with inflation and the contributionsto income tax revenues have been declining. Private sector salary andbusiness incomes increased with inflation and a larger proportion ofincomes reached the highest marginal income tax brackets which in turn hascreated incentives for tax evasion and avoidance. The income tax structurehas become out of date and is clearly a source of stagnation in income taxrevenues.

3.42 Another factor contributing to slow growth in both tax and non-taxrevenues has been the practice of discretionary tax enforcement. Despitethe Government's efforts to tighten tax enforcement, the time of paymentand amount of certain taxes -- most notably public enterprise taxes --remains negotiable. Apart from the fact that due to operating lossespublic enterprises are often unable to pay taxes, they have successfullypostponed large amounts of tax payments in the last few years through suchnegotiations. In 1985 cumulative tax arrears estimates available for 15public enterprises totalled So.Sh. 409 million or 8 percent of domesticrevenues. The postponement of tax liability without a high-enough penaltyhas contributed to a much slower growth in domestic revenues since 1984.

3.43 Tax avoidance and evasion continue to undermine efforts atimproved tax revenue collection. The incentive to avoid taxes remainsstrong in the face of an inadequate fiscal penal code. The problem of taxavoidance has manifested itself in the form of import and exportunderinvoicing; non-payment of excise duties, delays, underreporting andevasion of income tax and accumulation of tax arrears. According to onesource in Mogadishu, some portion of the tax liability is avoided in 50percent of the cases. There has been insufficient manpower and resources

10/A somewhat less critical problem has been the exemption from import dutyof all central government (including PIP) imports, internationalinstitutions, charitable organizations and key private sector importswhich together reduce the dutiable import tax base to 30 percent of thec.i.f. imports. Despite the fact that abolishing this policy wouldconstitute an accounting entry for the central government budget, itwill serve to reflect more accurately the revenues from imports and thetrue cost to the economy of central government programs.

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devoted to accurat asseszm*nt and collection of taxes. Although the newlyset up Ministry of Revenue made an impressive beginning, there is an urgentneed to redirect greater resources towards improving tax assessment andcollection.

3.44 There is very little recovery of the costs of public investmentand services. Prices charged on public services do not cover costs ofdelivery and a reasonable return on investment. In addition to fiscalarguments, there are good resource allocation arguments for chargingreasonable prices for agricultural and transportation services. There areno water charges for irrigation. Water is scarce and any use in periods oflow flow restricts other uses. Also, excessive water use complicates thedrainage and salinization control problems (in the Shobelli area). In thepresent situation, water saving crops and practices are not rewarded norare excessive water use penalized. Water charges should become importantboth for cost recovery and for support of water management systems,especially as major irrigation rehabilitation projsets are completed.

3.45 Land tax is extremely low (Sh. 5 per hectare of unirrigated andSh. 10 per hectare of irrigated land). In law, land is state-owned butmuch of it is leased in an arbitrary way including free leases. Thisurgently needs reform for domestic resource mobilization, equity andefficiency reasons. Prices for tractor services and charges for landdevelopment aro much below costs. Fuel is also underpriced. There is astrong case for greater cost recovery in most cases for augmenting revenuesand for better allocation of resources. While wider application of costrecovery measures would require further analysis, and developw'nt ofsystems and institutions, the problem is too important to delay thebeginning on a moderate scale.

3.46 Commodity Aid Utilization for the Budget. In the absence ofadequate public sector resource mobilization effort, local counterpartfunds generated through cash and commodity aid are becoming increasinglymore important in Somalia's budget. These funds were in 1985 (according todonors estimates) equivalent to the total domestic revenues on the centralgovernment budget. Donor estimates show disbursement of lo4al counterpartfund generating non-project aid in 1985 of US$137 million (see Table 3.3),generating a total of around So.Sh. 5.4 billion in local counterpart funds.About 80 percent of this non-project aid was given as grants. Cash aid wasabout $41 million, mostly from OPEC countries. The share of commodity aidsold in the private market varied among donors, but was around 15 percenton the average.

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Table 3.3

SOMALIAs Non-Proiect Aid 1985(US$ Million)

Cash Aid 41.0

Commodity Aid 52.2Of which:Petroleum 37.2Other 5.0

Food Aid 44.0Of which:PL 480 20.0

Total 137.2

Source: World Bank staff estimates.

3.47 In the Government's 1985 budget, 'current transfers from abroad'are shown as having been So.Sh. 3,445 million, without any breakdown. Thedifference between donor estimates (So.Sh. 5.4 billion) and theGovernment's budget estimate (So.Sh. 3.4 billion) is primarily due todifferent estimates of Saudi aid.11 The Government's recording system ofcommodity aid has improved especially for food aid. However, the recordsreveal a poor collection effort, particularly for food aid distributedthrough ADC.

3.48 There are several majbr weaknesses in counterpart fund budgeting,especially for non-food commodity aid. The budget is a mixture of cash andaccrual recording. This makes comparisons between donor and governmentestimates difficult. When public agencies (e.g. petroleum purchased bySomal Petrol) do not pay for their purchases of commodity aid goods, noreceipts are shown in the budget although these should be recorded ascredit extended to these agencies. Also, contrary to standard practice,the Ministry of Finance keeps some counterpart funds accounts in theCommercial Bank, enabling the Government to use these accounts as temporarylines of credit. Again, quite unrealistically, the 1986 budget included anestimate for "current transfers from abroad" of only So.Sh. 689 millionwhich is only 20 percent of the 1985 actual. Even though local counterpa-.tfunds would increase in the coming years, a large part of these funds are,according to donor agreements, to be used for development projects. There

1l/Saudi cash aid (including US$20 million for debt repayment) andpetroleum aid should have generated around So.Sh. 2 billion (at theofficial exchange rate). Apparently, the Government used the cash fordebt repayment without entering it on the receipt side.

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is a real possibility of a large build-up of surplus balances ofcounterpart funds. The Government needs to strengthen accounting andbudg-tting of these funds. The level of development (PIP) expenditure,financed by these funds should be consistent with financial stabilizationobjectives.Public Expenditurtes

3.49 Financial Discipline. Budgetary expenditure records andaccounting in Somalia remain less than comprehensive. The developmentexpenditures of the Government undertaken through the Public InvestmentProgram (PIP) are financed entirely by foreign grants and loans and do notform part of budgetary expenditures. Thus the Ministry of Finance does notexercise effective control over total public expenditures. Also, certainsensitive items of current expenditure (e.g. defense salary expenditures)do not appear in the budget. Public secoor wage bill, as it appears in thebudget, is net of defense salaty expenditures. Estimates of totalgovernment expenditures on salaries as shown in the Government's 1985 CGdocument12 indicates that military salary bill may be twice as large as thepublished civil service bill. Thus, current budgetary accountingprocedures understates the wage bill by about 66 percent. It is not clearunder which account defense salary expenditures are budgeted for.

3.50 Expenditures which do appear in the budget are less than fully'visible'. One third of the budget is a contingency item in the Ministryof Finance budget for which no disaggregation has been available from theGovernment. Despite the Government's resolves to the contrary, this itemhas remained large. In 1985, the expenditures titled 'other works' underthe Ministry of Finance increased by 100 percent to So.Sh. 2.3 millioncompared to So.Sh. 1.2 billion in 1984. In addition, it remains unclear ifthere are any explicit subsidies (and to whom) included in the budgetaryexpenditures 'Transfers, Recurrent Contributions'. The Government'sdocument prepared for the 1985 CG meeting made a specific reference toeliminating subsidies to public enterprises through improved cost recovery.However, not much information on implicit or explicit budgetary subsidieshas been available.

3.51 Over-Emphasis on Develowment Expenditures. The developmentexpenditures of the Government (i.e. the foreign exchange component of thePIP plus the local currency development budget financed by counterpartfunds) remain large relative to the recurrent budget. Developmentexpenditures as a proportion of total expenditures increased from 28percent in 1984 to 45 percent in 1985, and about 48 percent in 1986. Theproportion of recurrent expenditure to the total is much higher, and thatof development expenditure much lower in countries such as Malawi andKenya, and also in Sub-Saharan Africa as a whole. Clearly, the allocationof public expenditures in Somalia is in favor of undertaking additionalinvestment at the expense of operation and maintenance of existinginfrastructure and facilities.

L2/Ministry of National Planning, National Development Strategy andProgramme, Mogadishu, September 1985.

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Table 3.4

SOMALIA - Recurrent and Development Exponditures

(As percent of total government expenditures)

Average forSub-SaharanAfrica

1984 1985 1986 1981-85

Recurrent Expenditures 70.7 55.5 52.1 75Development Expenditures 27.7 44.5 47.9 25

Source: Based on data provided by Ministry of Finance and Recent EconomicDevelopments, IMF, September 1986; and Government Finance StatisticsIMF, various issues.

3.52 Underfunding of Recurrent Expenditures. The future recurrent costImplications of new development projects have not been worked throughduring the preparation of the public Investment program (PIP). Nor areconsiderations given to the ways and means of financing these additionalrecurrent expenditures. It should be pretty obvious, however, that theinvestment made in the PIP shall increase manifold the budgetaryexpenditures required for recurrent costs in the next few years. Roughcalculations of operating and maintenance costs for facilities created bypast investment in social and economic sectors, (such as public educationand health facilities, transportation and irrigation infrastructure, etc.)are shown in Table 3.6. In the absence of information on the recurrentcosts requirements of completed projects in Somalia, 'r' coefficients basedon experience in other Sub-Saharan countries are applied sector by sectorto the estimated public capital expendflure undertaken in these sectorsfrom 1980 through 1985. These rough aggregative estimates may involvesubstantial errors. It is important for the Government ministries anddepartments to make more disaggregited estimates of recurrent cost needsfor specific sectors and sub-sectors. However, these rough calculationsindicate that less than 15 percent of required recurrent costs arecurrently being provided for. The budget formulation process does notattempt to quantify and mobilize resources for recurrent cost needs ofcompleted development projects. In order to provide adequately foroperating and maintenance costs, resources budgeted in 1986 for theproductive sectors would need to be increased several times. If theexchange rate is unified (say, at So.Sh. 120 - 1US$) in 1987 the Somalishilling requirements for maintenance of existing capital stock in thepublic sector, social and economic facilities, will further increasesubstantially. These calculations do not take account of the pressure onthe budget from development projects completed as a result of the 1987-89PIP, which are expected to come on line around 1990.

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Table *.5

SOUAUIA - Reurrent Coat Reovi reentof Ebletina Public *ector Investment in soIIlia

Estiomted TotalCapital Stock 'r' Estimated Recurrent Recurront Required(US I Mi.l) Coeff. Cost Requiremonts Budget Incroase

for 1986 Provision In XMn USS Mn So.Sh for 1908

Mn. So.Sh. (d)/(t)(a) (b) (c) (d) (t)

Total Productive Sectors 1097.6 .... 86.6 6294.4 1076.7 486.1

Economic Sectors 926.5 - 57.9 4216.6 898.6 957.8Livestock 95.9 0.14 18.4 977.4 76.O 1203.2Agriculture 252.9 9.10 25.2 1884.6 886. 4652.7Forestry 20.7 0904 0.8 0.O -Fishorles 54.8 0909 4.4 819.2 87.2 757.9Mining 24.0 9.91 0.2 17.5 69.8 -71.8Monufacturing/Industry 184.8 9.91 1.8 98.1 18.2 643.4Energy 69.0 90.1 0.5 87.0 49.7 -25.6Transportation 162.1 09.4 6.5 472.0 66.2 692.1Tourlem 0.3 0.95 090 1.1 5.4 -79.8Trade & Commerce 28.7 09.1 O.8 19.4 10.2 90.6WOter Resources 194.4 O.56 5.2 3800.9 - -Poet & Telecom - 0.91 - - 86.6 -Juba Valley - 0904 - - 4.7 -

Soclal Sectora 171.8 - 20.5 2077.9 677.1 2 .9Education 77.1 0.17 18.1 954.2 88.32 162.7Heath 29.7 0.84 10.1 786.1 170.5 881.2Manpower 6.0 0.17 1.4 99.0 17.2 475.6Planning & Statistics 9.6 0.17 1.6 1186. 13.9 764.7Infomation 10.8 0905 096 87.6 112.8 -8.6Rural Devolopment 8C86 0905 1.8 188.2 - -

Notes:

(a) Estimated total capital stock 19U6 refers to total accusulated public investment undertakonduring 1980 to 19865 s it appero In the government document National Development Stratoav andProgra (mMoadihu, Septe r 1965). It Is assumed that, on average, the recurront costniois of this invemntimct fully 19068

(b) A 'r' coefficient io the ratio of annual recurrent expenditures required after completion ofthe project for proper utilization of the capacity or the facility through the budget to thetotal lnvestmet cost of theo project. The 'r' coefficients have been taken from (1) PeterHol ler, 'The Underfinancing of Recurrent Development Costs' In Flnance and Develom nt,Vol. 18, March 1979; and (11) Club du Sahel, R curront Cost o e vo ont Progrms in theCountries of the Sahel: Analysis and Recommendation, Report of a working group on recurrentcost, August 196. The 'r' coefficient refers to tho wage and non-wago costs arising annuallyout of the normal operations of the facility or project.

(c) (a) x (b); oxchang rate usd is So.Sh. 72. a US21, Bank staff estimate of the averageofficial exchange rates prevealing during January-October, 1968.

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3.53 The allocation of expenditures within the recurrent budget hasbeen grossly in favor of less productive activities and at the expense of*griculture, transport, education and health. In 1985 general publicservices including defense consumed 88 percent of recurrent budget, whilethe combined shares of social and economic services dropped to 12 percentfrom about 34 percent in 1976-80. Despite the Government's declared intentto the contrary, the share of social and economic services was furtherreduced in the 1986 budget. The share is ridiculously low compared to Sub-Saharan Africa as a whole.

Table 3.6

Sectoral Recurrent Expenditures(As percent of total Recurrent Expenditures)

Average forSub-Saharan

1984 1985 1986 Africabudget 1981-85

General Public Services(Including Defense) 82.9 87.6 88.8 63

Social and EconomicServices 17.1 12.4 11.2 37

Sources Based on data provided by Ministry of Finance, Somalia; andGovernment Finance Statistics, IMP, various issues.

Past underfunding of social and economic sectors has resulted in an erosionof the quality and quantity of services provided. In many places, majorroads have deteriorated to such a large extent due to lack of timelymaintenance that a complete and costly overhaul and rehabilitation hasbecome necessary. This is also largely true of the irrigation system alongthe Shebelli river. In the education sector also, non-wage expendituresper pupil have declined steadily by 4 percent annually between 1980 and1984. With hardly any textbooks and teaching materials, students, teachersand parents do not find classrooms particularly useful. Officialstatistics show that there was practically no increase in enrollment duringthe same period. The elementary school enrollment ratio fell from 30percent in 1980 to 19 percent in 1984. It is imperative that theGovernment undertake serious restructuring of its total expenditures infavor of the recurrent costs, and divert greater resources to recurrentcost requirements of the economic and social services, including those forhuman resource development.

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3.54 Public Sector Salaries. The low level of budgetary revenues areunable to support increasing expenditures on an overly large civil service.The total civil service wage bill (excluding defense) doubled from So.Sh.383 million in 1980 to So.Sh. 684 in 1984. Salaries (including defense)consume one-third of total recurrent bu4get. In 1985 central governmentexpenditure on salaries (including defense) was So.Sh. 2.2 billion.Although the Government discontinued the policy of guaranteed employment ofall school leavers in 1983, the civil service ranks had become considerablyswollen by then, resulting in a large increase in the wage bill notedabove. Estimated civil service employees (excluding defense personnel andpublic enterprise employees) are estimated to be around 45,100 in 1985.(Including public enterprise employees, the size of the public sectoremployees is around 93,000.) Civil service salaries are very low. Apartfrom a 10 percent cost of living increase in 1980, salaries have not beenrevised in recent years. Civil service salaries in 1985 were 15 percent oftheir 1977 level in real terms. Although there has been virtually noincrease in salaries, there have been increased allowances. Whereas someallowances have been across the board others have been granted byindividual ministries. Allowances in recent years have added considerablyto the wage bill. In 1984 allowances were So.Sh. 137.4 million or 22percent of the non-defense wage bill.

3.55 Low levels of salaries are a primary determinant of the low moraleand motivation of the civil service. This has been a major factor behindSomalia's weak economic management and fairly ineffective transfer of know-how through a massive technical assistance program. Efforts for publicsector resource mobilization will fall short without a well-compensated andwell-functioning civil service. There is need to raise public sectorsalaries to restore the purchasing power of earlier years. Moreimportantly, overall compensation structure as it exists today should berationalized and made more 'visible'. Allowances and benefits have to betied to job level. However, increases in total public sector wage bill areunsustainable through the present budget resources. Salary expenditurescan be restructured to provide a higher level of compensation for a reducedof public sector employees only if domestic budgetary revenue is increasedrapidly and substantially. However, hardly any progress has been madetowards reforming the civil service through recasting of salaries andreduction of numbers.13

Summary and Recommendations

3.56 In sum, despite considerable progress in policy reform, the agendaof actiods proposed in the Government's recovery and adjustment programhave not yet been fully implemented.

13/The Somali authorities informed the Bank staff that they reduced thenumber of civil servants by 3,000 each year in 1985 and 1986; and thatin January 1987, salary increases ranging from 26 to 40 percent weregiven to low-paid staff.

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3.57 The pricing and marketing of most agricultural products have beenliberalized. However, the pricing and marketing of some products (e.g.hides and skins) remain under government control. Most of the controls onimport and export trade have been removed, but petroleum pricing and importstill remain under government control.

3.58 A major exchange rate reform was initiated, though this resultedin practice to a multiple exchange rate system which provided incentivesfor traditional exports (although possibly not for diversification into newexports) but introduced significant distortions in resource allocstion andadversely affected government revenues by creating confusion in computationof values of imports for tax purposes. Still greater incentives throughexchango rate policy would be desirable in future to encourage expansionand diversification of exports, domestic production of import-substitutesand to attract private remittances.

3.59 Despite some efforts to increase revenue, the deficit on thecurrent budget continues to be large. Fiscal and monetary objectives havenot yet been achieved. For example, no significant progress has been madein reducing inflation after 1985. The Ministry of Revenue, was created tostrengthen tax administration and collection. But serious weaknesses stillremain in revenue collection. Hardly a beginning has been made in costrecovery. Public dissavings still remain high. Interest rates wereincreased somewhat in recent years, but real interest rates are still verynegative.

3.60 In regard to improvement of public investment and public sectormanagement to raise productivity of public resources for economic growth,policy implementation has not made much progress. Profitability criteriaare yet to be widely used in the selection of public investment projects.Recurrent cost needs are yet to be seriously estimated and provided for.Public enterprise reform is yet to be undertaken.

3.61 Thus, while the developments in economic and policy performanceare positive and in the right direction, the impact on the fundamentalinternal and external imbalances of the economy so far is negligible.Aggregate consumption about exceeds GDP; so, gross domestic savings areabout nil. Government revenues are grossly below government recurrentexpenditures; recurrent costs of public investments continue to beseriously underfinanced. Exports, despite some recovery, cover only abouta quarter of imports; the balance of payments deficit, though slightlyreduced, remains large. There is a continuing debt service crisis withabout $173 million arrears at the end of 1985, and a debt service ratio ofaround 100 percent per annum in the medium term.

3.62 The chronic adverse external imbalance requires special attentionbecause of the sharp dichotomy between the private and public sector use ofimported goods. Though exchange rate reforms have imposed discipline onthe private sector, public sector imports are not subject to the samemarket discipline induced by adjustments in the exchange rate.

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3.63 The policy issue for export promotion involves more than exchangerate adjustment and export liberalization. Rinderpest outbreak in the EastAfrica Region has-been cited as the reason for banning Somali cattleimports in its principal market. Even if there are other reasons for theban, the quality problem must be addressed directly by (a) investment forimproving quality production through veterinary services, disease control,feeding, etc.; and (b) incentive schemes for producers to improve quality.

3.64 Finally, the issue of public expenditure reform, revenuemobilization, and civil service salary must be considered in the context ofthe macro economy. Salary increases in real terms are better achieved in astable price environment. Any salary increases leading to expenditureincreases are likely to deepen existing internal and external imbalances,unless associated with reductions in the rate of inflation and substantialrevenue increases.

3.65 Continuation of the economic growth with slow but steady progresstowards adjustment of the external and internal imbalances would require asustained implementation of the remaining aspects of the policy reformprogram and new measures to promote efflcient use of resources, encourageexport expansion and import-substitution, and improve incentives andopportunities for greater private sector investment in the economy. Theseinclude:

(a) unification of the exchange rate and its maintenance at arealistic level to improve resource allocation and providestrong incentives to exports, import-substitution, andremittances;

(b) improvement in tax administration and public sector domesticresource mobilization, and control of government expenditureto eliminate current budget deficits for financialstabilization;

(c) increased provision for recurrent expenditure for economic andsocial services along with restraint on general services tomake effective use of existing facilities;

(d) use of profitability criteria in selecting projects forinclusion in the PIP with a focus on the growth generatingsectors, to improve productivity of public investment;

(e) removal of remaining controls on the prices and marketing ofimported goods, especially petroleum and related products, toimprove allocation of resources;

(f) liberalization of exports of hides and skins, and frankincenseand myrrh to improve opportunities for private sectorparticipation in production and export growth;

(g) simplification of import tariffs to make protection moreuniform among products (except for luxuries and undesirableitems) for ensuring resource allocation to efficient users;

(h) control and monitoring of food aid to sustain incentives fordomestic crop production;

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(i) further improvement of incentives and opportunities toencourage private sector savings and investment, interest rateadjustmant to real positive levels to improve creditallocation and introduction of private bank(s) to help improveservices to the private sector;

(j) civil service reform with a reduction of numbers and arecasting of salaries; and

(k) public enterprise reform to phase out unviable enterprises andrestructure others for improving resource use efficiency.

CHAPTER IV

MEDIUM-TERM PROSPECTS

4.1 The medium-term prospects for growth and development withadjustment in the basic imbalances of the economy would depend on thesustained implementation of existing policy reform and initiation of newpolicy measures to promote efficient resource use in the economy, noted inthe previous chapter.

Constraints

4.2 Economic growth in 1984 and 1985 was led by livestock and cropswhich would continue to be dominant in the medium term. But the basicconstraint to the growth of livestock production over the medium and longterm has already been noted in Chapter I. As shown by the recentagricultural sector report,1 average growth in the production of livestockis expected to be about 2 percent per annum in the long run because ofrange land capacity. In the medium term, a slightly higher livestockgrowth of 2.5 to 3 percent is considered feasible with effective rangelanddevelopment, since ruminants which constitute the largest stock, and havegrowth rates between 2 and 3 percent can obtain part of their feed frombrowsing (see Table 4.1).

Table 4.1

Somalia: Estimated Livestock Population(Millions of Heads)

Year Cattle Camels Sheep Goats TLU a/

1975 3.7 5.3 8.7 14.0 11.61980 4.5 5.8 10.3 16.8 13.31984 4.2 6.1 11.2 18.0 13.61985 4.4 6.2 11.8 18.3 14.0

Average Annual Growth Rate (X) 1.4 0.8 3.3 3.9 2.5

a/ Tropical livestock unit - 250 Kg. TLUConversion factorss sheep and goats 0.1, Camels 1.2, Cattle 0.8.

Source: Somalia, Ministry of Livestock, Forestry and Range.

1/ Somalia: Agricultural Sector Survey, World Bank, April 1986, (draft).

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4.3 For crops the recent increase in production was due partly tocultivated area, mostly rainfed, which increased by 53 percent in 1980-85,and partly to increased yield (38 percent). 2 A feasible average growthrate of 5.4 percent for agricultural crops in the long run is suggested bythe recent agricultural sector study.3 It is predicated on irrigationrehabilitation, development of new irrigation facilities, and improvedwater management involving substantial investments. In the case of somecrops (e.g. rice, cotton, sugarcane, vegetables), such an expansion wouldlead to the use of more and more marginal land requiring increasedinvestment in water control techniques. Over the medium term, an annualgrowth rate of 5.4 percent could be achieved provided incentives aremaintained, and input availabilities are increasingly improved.

4.4 The Government needs to pursue a medium term strategy which willsupport long term development given the structural constraints, limitationsof natural resources and scarcity of skills and address the debt crisis andlarge financial imbalances over the medium term to attain a sustainablebalance of payments. The structure of the economy dictates that over themedium term the strategy should aim at realizing the production growthpotentials of livestock and crops, through appropriate policies andinvestment allocation noted earlier, and at relaxing long term constraintsthrough human resource and institutional development as well as developmentof unused natural resources (e.g., water and power).

Growth Prospects

4.5 The unpredictable nature of external shocks such as the import banon Somali cattle, the changes in the price of oil, the influence of weatherconditions on agricultural growth, and the poor quality of Somali data aremajor sources of uncertainty in the analysis of future economic prospects.Subject to these qualifications, and on assumption of sustained policyreform for improving resource use efficiency a Revised Minimum StandardModel (RMSM) framework4 is used in analyzing medium-term (1986-91)prospects for growth, the corresponding balance of payments scenario, thedebt service and aid requirement.

4.6 Relative to past performance (1980-85) a real GDP growth of 4.1percent per year is feasible in the medium term with sustained policyreform. Agriculture would continue to be the leading sector with about 4.2percent growth, with crops being the major potential source of growth ofabout 5.4 percent and livestock output growth of 2.5 to 3 percent. Inmanufacturing production, an annual growth of 3 to 4 percent is feasible

2/ Ibid.

3/ Ibid.

4/ The RMSM used here includes (a) the imposition of a floor of constantreal per capita consumption for social and political stability, (b) theuse of policy change including exchange rate liberalization to influencerelative pricas, domestic food production, and food and oil imports, and(c) separating private from public investment.

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with the increased availability of raw materials (e.g. sugarcane) fromagricultural output, the decontrol of petroleum marketing, and improvedincentives for the privat, sector.

Table 4.2

Somalia: Scenario of Growth and Distribution of GDP(Constant 1985 Prices)

Growth Rates (% Per Year) Output Share of GDP (% of Total)Actual(a) Scenario Actual(a) Scenario

1985 1986-91 1985 1986-91

GDP at Factor Co0t 6.3 4.1 100 100Agriculture 7.3 4.2 58 56Livestock 2.3 3.0 39 32Crops (*) 19.7 5.4 19 24

Industry 7.2 3.5 9 11Manufacturing 16.0 3.3 6 6Other (+) -7.3 3.7 3 5

Services 4.4 4.0 33 33

Population Growth 2.9 3.0 2.9 3

Share of GDP (X)

1985 1986 1986-91 1991(Actual) Scenario

Consumption 105.5 104.6 101.7 98.9Investment 15.3 14.6 15.5 16.7Imports 27.6 26.0 24.4 23.0Exports 7.0 7.3 8.0 8.5Savings -5.5 -4.6 -1.7 1.14Resource Balance -20.8 -18.7 -16.4 -14.5Current Account Balance -21.7 -22.6 -21.0 -19.6Savings-Investment Balance -20.8 -18.6 -16.4 -14.5

(*) Includes forestry and fishing.(+) Wzing, quarrying, electricity and construction.

Sources: Staff estimates from data obtained from Somali authorities.

4.7 Given the small size (6 percent of GDP in 1985) of themAnufacturing sectort its contribution to GDP will be negligible. Medium

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term growth will have to be generated mostly from agriculture specificallylivestock, crops and fisheries through a combination of (a) selectiveinvestment (PIP) in the agricultural sector in rangeland development,improvement of fodder supply on stock routes to ports, expansion ofveterinary services, water control, irrigation rehabilitation andmanagement of food aid to support crop output, especially grains and (b)directing government recurrent expenditure allocations to emphasize thedelivery of social and economic services to the growth areas. The deliveryof social and economic services through recurrent cost allocation wouldsupport the development of human resources and promote the maintenance andeffective use of existing investment, in social and economic infrastructureas new investmerAt is selective and focussed on the growth activities.Medium-term growth would, therefore, be consistent with longer termdevelopment objectives.

4.8 The adjustment issues are complex, involving growth promotion withimprovement in the balance of payments, and raising the savings ratio whilemaintaining a level of real per capita private consumption in order not toprovoke social and political unrest. Even with 4.1 percent annual growthof GDP and a floor of constant real per capital consumption, averageconsumption to GDP ratio would remain at about 102 percent during 1986-91which is an improvement over the first half of the 1980s. Consequently,average savings would improve slightly, but would still remain negativezver the medium term. Overall improvements in the imbalances betweenconsumption and production, and between savings and investment would bemarginal even with a 4.1 percent annual real GDP growth.

4.9 The dependence on import surpluses to support investment andconsumption would, therefore, continue during 1986-91. To envisage a morerapid adjustment and improvement in the basic imbalances consistent withgrowth would be unrealistic. For a lower growth rate, say 3.5 percent, theimbalances would be more severe, with the economy more dependent on importsas the savings ratio remains negative, and the ratio of trade deficit toGDP becomes more chronic.

Balance of Payments Prospects

4.10 There is scope for the continued recovery of exports of livestock,and moderate export growth of bananas, hides and skins, and myrrh. Fromthe base level of 32,000 heads of cattle exported in 1985, and givenaverage annual exports of 105,000 heads in 1980-83 (157,000 peak in 1982),an average annual growth of cattle exports of over 20 percent is feasible,but export performance remains constrained by the ban in the principalmarket. The overall export scenario (Table 4.3) shows continuing recoverywith the major increases coming from livestock as liberalization and searchfor new markets continue.5

4.11 Since exports and remittances cannot be expected to grow fasterthan projected, Somalia's adjustment will have to be through significantadjustment of import dependence. Import restraint and import substitution

5/ A 4 to 5 percent world price increase for livestock andf banana, and a 3to 5 percent increase for other exports are assumed in the exportscenario (Table 4.3).

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through appropriate adjustment policies are built into the importprojections which are 'normative' but appropriate for medium term growth(Table 4.3). The composition of imports is expected to change with importsubstitution of foodgrains. However, continued substitution of localstaples for imports will depend on management of maize surpluses andpricing policies designed to switch expenditures to locally-grown staples.Overall imports would increase in the medium term in response to growthrequirements, even with policy reforms. The import projections includerequired food imports for the population, and imports of petroleum, andother items incluCing intermediate and capital goods to support the growthof GDP in the medium term through rehabilitation and expansion of existingcapacities as well as creation of some new capacities. The leading sourceof expected increases in imports is investment goods imports due mainly tothe Government's planned Public Investment Program (PIP) including thebeginning of the multi-purpose Bardhere dam project. It is appropriate toview the PIP imports as complementary rather than directly productiveinvestment. The PIP is expected to be focussed on the agricultural sectorto support infrastructural, institutional and human resource developmentwhich have relatively long gestation periods and thereby support growth anddevelopment over the medium and long term.

Table 4.3

Somalia: Trade Balance(US$ millions current)

Actual -------- Scenario----------------1985 1986 1987 1988 1989 1990 1991

Exports (f.o.b.) 93 108 120 133 148 170 188Livestock 66 74 82 98 108 119 130Banana 12 16 18 20 22 25 30Other 14 16 18 20 23 26 28

Imports (f.o.b.) -362 -377 -403 -429 -439 -450 -480Food -66 -56 -54 -52 -49 -46 -43Oil -63 -46 -52 -58 -59 -60 -65Intermediate Goods -38 -44 -47 -50 -52 -55 -59Investment Goods (*) -164 -199 -210 -223 -235 -238 -246Others -31 -32 -40 -46 -44 -51 -67

Trade Balance -269 -269 -283 -296 -291 -280 -292

(*) Machinery and transportation equipment.

4.12 Even with continuing growth and export recovery, the trade deficitwould increase slightly to about $280 million a year in the medium term(Table 4.3) which is about 17 percent of GDP. Relative to GDP however,there is a slow improvement in the external balance as the import ratiodecreases from about 28 percent in 1985 to about 23 percent in 1991 whilethe export ratio rises from 7 percent to 8.5 percent in the same period,causing the trade deficit ratio to fall.

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4.13 The medium term external financial situation Is characterized by achronic deficit on the current account (Table 4.4) and largo debt servicesrequiring more aid and debt rescheduling. Exports by 1991 would cover onlyabout 40 percent of imports. The current account deficit (excludinggrants) would persist in the sedium term at over $300 million a year (21percent of GDP), leading to an overall imbalance including debt servicecommitments between $450 million and $400 million a year in the medium term(Table 4.4).

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hble 4.4

w~ ~ ~ ~~~~~Pa xea Bo g

*~~~

1. Ormt Amount hnipts 12 145 163 183 215 23R 3311. ;; dw Iat ports

(fob) 108 121) 13 148 170 8 277lb. Pkivl wTmfras 20 25 30 35 45 50 54

2. Cwraito Aut nwMts 467 461 481 487 498 526 6452a hwudwas Imports*

(fob) 377 403. 429 439 450 480 5902b Ntb'aUr Suvicm

(1s1) 14 5 0 0 5 6 53 2 FhctorSevim (nat) 13 0 0 0 -4 -1 43d htuzt onldDebt 63 53 52 48 47- 39 46

* 3. Oxwwt Am t 1efidt 339 316 318 304 283 286 314

4. _, tal Ry,y ts anGU DJt 95 134 140 93 84 78 824a lRmntof Prlnpu 86 63 63 58 69 76 774b bzdme from tW/M9 52 58 35 15 2 54c Pldim ofArrars 0 19 19 0 0 0 0

5. Pw4pina .enes(b) 5 5 5 5 5 17 17

6. Total Financing Requirements(3#45) 439 455 463 402 372 381 413

7. TOWal CapftnI n1owfrcmQd Ca_tract 302 306 311 144 90 65 377a 1 r a fram

orazs (a) 185 187 190 66 35 17 0msuu. sferoe

Iaz (a) 117 119 121 78 55 48 37

R. Overall Gap (inc. rants) 137 144 152 2.5A 2R2 116 376

9. Owerdl Gap (ei:. Grants) 322 336 342 324 317 131 376

(a) (rant and loans generated fran pipeline.(b) Based on D# estfrtes* See Table 4.3 for disaregation of nerchanise lniports.

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4.14 Wedium-term financing would depend critically on disbursementsfrom pipeline aid, and inflows from new aid commitments. Total inflow ofgrants and loans in 1985 was $290 million with an undisbursed pipeline6

which would give an estimated aid flow of about $300 million a year in1986-88. If for each year 1989-91, aid flow is maintained at the 1988level in real terms (Table 4.4), it would require new commitments of $550to $600 million a year and a quick disbursement pattern, particularly forcash grants and commodity import programs to finance the gap.7

Debt Relief

4.15 A major element in Somalia's economic prospects is an unbearablylarge external debt service obligation. Total debt service is $158 millionin 1986 and would remain on the average at $150 million a year (Table 4.5)in the medium term amounting to over 100 percent of export earnings. The"non-reschedulable" debt service, comprising multilateral debt service anddebt service due to the 1985 debt relief, rises from $51 million in 1986 to$100 million in 1988, and remains at about $60 million a year up to 1991.The multilateral debt service alone would average about $60 million a yearrequiring 50 percent of export earnings in 1986 rising to over 60 percentin 1988. Somalia's medium term prospects are bleak unless the debt serviceproblem can be grappled with and resolved. However, since as high as 213of debt service or around $100 million per year is owed to non-reschedulable creditors, Somalia's debt problem is complicated and requiresspecial treatment. Because of the large non-reschedulable serviceobligation, Somalia faces a serious cash problem over the medium term,which cannot be resolved with rescheduling only. No matter how generousthe terms on which the bilateral debt service obligations falling due inone year (e.g., 1987) are rescheduled, it will not ensure an affordablelevel of total debt service obligation either for that year or thefollowing years, because it will neither reduce the large non-reschedulableobligations for any year, nor the bilateral obligations for the lateryears.

4.16 Additional financial aid and debt rescheduling would be requiredto achieve an orderly financing of imports and debt service. To ensure asustainable balance of payments including debt service, it is necessary toarrange multi-year rescheduling or regular yearly rescheduling of allbilateral obligations at very soft terms - long maturities and low interestrates, so that all bilateral obligations are almost entirely deferred for adecade or so and cash assistance or new aid flows (other than project andcommodity aid) are provided to enable Somalia to make orderly payments tonon-reschedulable creditors. A viable financing plan consistent withgrowth objectives should (i) lead to net capital inflows, (ii) lead to amanageable debt service burden, (iii) support the implementation of policyreform and economic recovery, and (iv) contain reasonable levels of newsoft aid. Unless debt service payment is considerably reduced through debtrelief, consumption will fall below acceptable levels.

6/ Estimated at US$1200 million.

7/ Based on rescheduling on soft terms (Table 4.7).

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Table 4.5

Somalia: Debt Service

(US S Million)

1986 1987 1988 1989 1990 1991 1995

Total Debt Service (a) 158 168 173 141 131 117 128Principal 95 115 121 93. 84 78 82Interest *63 53 52 48 47 39 46

Multilateral Debt (b) 41 82 88 59 54 56 65Principal 18 63 71 47 41 39 46Interest 23 19 17 12 13 17 19

Other Debt (c) 117 86 8S 82 77 62 64Principal 77 52 50 46 42 40 36Interest 40 34 35 36 35 22 28

Ion-reached. Debt 51 95 100 72 54 56 65Multilateral (d) 16 17 19 19 33 49-. 55Bilateral funds (e) 10 13 12 13 - -IkF/AMF 25 65 69 4.0 21 7 10

Ratio of Merchandise Exports

Debt Service (s) 1.5 1.4 1.3 0.9 0.8 0.6 0.5lon-rescheduable 0.7 0.8 0.8 0.$ 0.4 0.4 0.3Multilateral (b) 0.38 0.68 0.66 0.4' 0.32 0.28 0.25

Source: Ministry of Finance, External Debt Unit.

(a) excludes debt service and frozen arrears owed to China, Bulgaria andthe USSR.

(b) includes the IMF and the AHF.

(c) OECD debt and other bilateral agencies.

(d) excludes IMF and AHF.

(e) Kuwait Fund and Saudi Fund.

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4.17 In line with the above objectives, two debt relief scenarios wereconsidered. For both scenarios, we assume that multilateral debt serviceand debt service on past debt relief (Table 4.5) will not be rescheduled.Scenario I (Table 4.6) adopts a multi-year rescheduling for 95 percent ofthe remaining debt service due during 1986-90 at 9.8 percent interest, 6years grace, and 12 year maturity terms which are similar to terms obtainedby Sudan at the Paris Club. The remaining 5 percent is paid in four equalannual installments.

4.18 The debt service profile is shown in Table 4.6. Debt reliefamounts to about $100 million in 1986, declining to about $42 million in1990. The resulting debt service added to the nonreschedulable debtservice would result in a new debt service ratio of 90 percent in 1987 and1988, declining to 52 percent in 1990 and, rising again to about 80 percentper annum during 1991-95 as debt rescheduling is stopped. Additional aidrequired to close the net gap would be nearly $100 million a year during1987 and 1988 which would add up to overall aid flow of between $400 and$450 million a year in the medium term. There would be need for loan andgrant commitment of over $600 million a year, including cash grants formeeting the financing requirements of growth and recovery. Under thisscenario, debt service would still be unmanageable.

4.19 In scenario II (Table 4.7) the focus is on reducing the debtservice burden in a multi-year rescheduling, on softer terms and longermaturity. It is assumed that 95 percent of all reschedurable debt servicefor 1986-90 is rescheduled at 2.6 percent interest, with 9 years graceperiod, and a maturity of 19 years.8

8/ These are close to the average terms of recent concessionary loans toMadagascar which has had a similar debt management problem.

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Tblu 4.6SWAM: Firanuuci b h1i4 Scmwt o I

1966 1967 19' 1989 1990 l491 1992 1993 1994 1995

1. Fiiwbqzg Ihul(irui(a) 43 455 463 402 372 3R1 394 404 40 413

2.Imnd (kw= 30 3MA 311 144 90 65 62 48 35 37Cxnts (b) 185 187 190 66 35 17 11 6 0 0tin (c) 117 119 121 78 55 48 51 42 35 37

3. ap (d) 137 149 152 258 282 316 332 356 371 376

4. Net PIblhduU (e) -35 -50 -31 -12 -160 -183 -201 -219 -236Gsed Ub9&W (f) 102 73 73 69 77 0 0 0 0 0

Rescheduled debt Servic (g) 7 14 23 28 35 42 43 79 94 107TrA Nw Debt Sevic8 () 58 109 123 100 89 160 183 201 219 236

5. Gap ln'dx 137 149 152 258 282 .316 332 356 371 376Dbt Pla1M (i) 100 59 50 41 42- -42 -64 -79 -94 -107Addit al Aid RPuired 37 90 1M 217 240 35R 396 435 465 483

* i W(j) 37 60 67 146 161 240 266 291 312 325Comb (k) 37 35 35 35 35 35 35 35 35 35-Other 0 25 32 111 -12 205 231 256 277 290

imm 0 30 35 71 79 118 13n 144 153 158

6. 1Mmonku iteN;w Cam ,t- Pa*dxs (1) 150 250 150 600 300 600 600 480 48 55n

Qits (a) 100 170 10 4M 200 400 40X 32t 320 370IAMB 50 80 50 200 100 2)0 2D0. 160 160 180

Debt Servce RPato 0.54 0.91 0.92 0.67 0.52 0.85 0. 0.88 0.87 n.85

Now.e on Table 4.6

(a) Is the sum of current account deficit, capital repayment on old debt plus increase inteaervei, shown in Taible 4.4 Line 6.

(b)(c) Comprise expected disbursement from pipeline.(d) Li 1 Ilisne 2.(e) (f) les (h),(f) See Table 4.5 (total debt service less non-reschedulable debt service).(g) Mlti-war reschedultir of debt seiice in (f) frem 1986-90 bls on term obtained for Sudan

which are 9.8 per-nt ntent, 6 yeas grare period, and 12 years marity.(h) Tied otber deft .mrvtce nnt r"u4iAtlmf.(i) (Table 4.5, line 1, less Table 4.6 (h).(j) ased on abc z j or new aw required.(k) Base dan past prrfonam.(1) Asswe a disburswent pttetn reprmsntirW an avere for project aiTi non project loans (257, 207,

1R%, 15i, 122, 5%, 5%) such that cced utas can mcate the fw of aid requirei.(m) About 2/3 of nte ca,dmnt in !¢ant aid, 'm tte ret Is lkns,

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Table 4.7Sa1U.a: l fr.r:itn wrn LZ bt ReIef Seenrlo II

(US DolUar MIllIf)

1986 lq87 19M8 1989 1990 1991 1992 1993 1994 1995

1. PItnnig Raquirumits(a) 439 455 463 402 372 381 394 404 406 413

7. Um and Ormts 302 306 311 144 90 65 62 48 35 37Grats (b) 185 187 190 *66 35 17 11 6 0 0Icen (c) 117 119 121 78 55 48 51 42 35 37

3. Gap (d) 137 149 152 258 282 316 332 356 371 376

4. Not Peehedu1rIM 50 -26 -33 -10 -66 -129 -139 -149 -159 -169GM uUudhduling (f) 102 73 73 64 77 0 0 0 0 0

Rescheduled Debt Service (g) 1 4 6 7 9 11 20 27 34 40T Now Dbt Service (h) 52 99 106 79 63 129 139 149 159 16l

S. GAP pII g(+) 137 149 152 258 282 316 332 356 371 376Deb t P tf() 106 69 68 62 68 -11 *-20 -27 -34 -0Ad&tiul Ald PquLred 31 80 85 196 214 327 352 383 405 416

&atea(O) 31 50 55 131 143 219 236 257. 271 23oMsh (k) 31 35 35 35 35 35 35 35 35 35Ot r 0 15 2n 96 IO 184 201 222 237 245

toaf 0 30 30 65 7 10M 116 126 133 136

6. *w Comdirmts Requdred 120 200 100 600 350 500 5CO 46n 350 500

Grants (1) 80 130 65 4n0 230 340 340 270 230 u4n

tioai (m) 40 70 35 200 120 160 160 130 120 16n

Debt Service Ratio 0.48 0.82 0.79 0.54 0.37 0.69 n.67 0.65 n.63 0.61

N%tes on Table 4.7

(a), (b), (c), (d), (e), (f) See notes for Table 4.6

(g) .izti -,ear reschedullrg of 95 percent of debc service d*ue frcm 19R86-c on softterms: 2.6 percent interest, 9 years of grce, am 19 vears maturity.

(h), (1), (j), (k), (t), (tm) see notes on Table 4.6

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4.20 The resulting additional financing requirements and the debtservice profile are shown in Table 4.7. Compared to the first scenario,the debt service profilo is improved; but still the debt service ratioremains about 80 percent a year in 1987 and 1988, declining to 37 percentin 1990, since nearly 50 percent of the debt service which is mainlymultilateral is not eligible for rescheduling. Also, additional aid flowsand commitments required to finance the gap are slightly lower than inscenario I. But even under scanerio II, additional aid of $80-85 million(including $35 million cash) per year would be required in 1987 and 1988.In both debt relief scenarios, the amount of debt relief turns negativeafter 1990 as the total new debt service from the rescheduling exceeds theoriginal debt service (without rescheduling) causing a sharp increase innew aid requirements.9 This means that in order to achieve an orderlydebt service scenario after 1991 and also reduce the level of aid required,there will be need for more debt relief during that period.

4.21 Given the share of debt service which is not subject torescheduling, a viable solution to Somalia's financing gap and debt serviceproblem would require a three-pronged approach including (a) reschedulingon soft terms; (b) additional flow of quick disbursing aid including cashgrants over and above the current level of aid flows; and (c) sustainedpolicy reform to achieve growth and a gradual even if slow correction ofthe serious internal and external imbalances facing the economy. Exchangerate adjustments have contributed to a decline in private sector imports.One basic adjustment problem, however, is that the larger share of imports(over 70 percent in 1985) is channelled through the public sector throughgrants and loans, and therefore, not subject to the same market disciplineon the private sector due to exchange rate reforms. Thus, enforcement ofefficiency in the use of imported goods would require (i) improved aidcoordination and selection of quality projects to maximize productivityfrom the PIP which is the single largest user of imports, and (ii)increased chanelling of imports and investments through the private sector.

4.22 Somalia's external imbalance is so large that only sustainedadjustment efforts will not be sufficient in themselves, but need to becomplemented by large inflows of foreign aid and considerable debt reliefevery year, if economic growth is to be maintained over the medium-term.During 1987-88 Somalia will require average annual aid disbursements ofnearly $400 million, about $250 million in grants and $150 million in(mostly concessionary) loans (Table 4.7); roughly one-half of these inflowswill be required for quick disbursing commodity aid and balance of paymentssupport in the form of food, petroleum, other commodities and cash.Disbursements from the aid pipeline would amount to about $300 million ayear, and hence additional disbursements of nearly $100 million from newaid commitment will be necessary. In addition, about $70 million in debtrelief per year will be required. As the existing aid pipeline getsexhausted, larger new aid commitments are required for 1989 and beyond.Through the Consultative Group process it should be possible to co-ordinate

9/ This debt service pattern is similar to the Madagascar case.

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donor support to mobilize resources to finance the prospective gap,provided the Somali authorities sustain and strengthen the policy andinstitutional reforms required for adjustment and growth, as noted inChapter III.

Govnenmnt Budiet Prospects

4.23 The budgetary outlook for the next few years is likely to be grim,although stabilixation and domestic resource mobilization objectivesrequires quick elimination of the Government's current budget deficit.Given the low levels of revenue, it is unlikely that the current budgetdeficit can be eliminated in the next one or two years. To achieve acurrent surplus in the medium term, a much stronger revenue effort than inthe past will have to be made to raise domestic revenues from the existinglow level of 5-6 percent of GDP to a higher ratio prevailing in earlieryears, and improve financial discipline and expenditure control, whilerestructuring expenditures towards greater financing of economic and socialservices, and civil service salaries with a corresponding reduction ongeneral services.

4.24 It is important for the Government to prepare a medium-termfinancial plan giving estimates of likely domestic revenues and theproposed expenditures the revenues will be required to finance. Such aprojection can help onvisage the potential of financing badly neededrecurring costs, assess the prospects of government savings to finance partof the PIP, and to identify areas of future policy changes.

4.25 One such budgetary projection is attempted here on the assumptionof sustained revenue effort and expenditure restraint as suggested above.The revenue projection is based on the projections of GDP and externaltrade noted *arlier, and do not assume any change in the rates of taxation.On the expenditure side, interest payments are projected on a cash basis,reflecting the interest portion of the non-rescheduable debt service shownin Table 4.5. However, difficulties have been faced in projecting theexchange rate and the rates of domestic inflation. The date of unificationof the exchange rate and the level at which it will be unified is one ofcrucial importance since an increase in domestic revenues (which comeslargely from import tax revenues) is dependent on the valuation ofmerchandise imports at an appropriate exchange rate. The uncertainty iscompounded when projecting domestic inflation in Somalia, given pasterratic trends in annual inflation. Notwithstanding these uncertainties,Table 4.8 gives a summary of budgetary operations for 1987-91.

4.26 Domestic revenues are expected to increase from 6.2 percent of GDPin 1986 to 9.1 percent in 1991. Most of the increase in revenues in 1987is due to the revision in import tax revenues following revision of importvaluation policy and exchange rate unification.10 Expenditures areexpected to increase less rapidly than before and are restructured toprovide for higher salaries for civil servants and increased allocations

10/Exchange rate is assumed to be unified in 1987 at So.Sh. 120-US$1.Domestic inflation is expected to be 25 percent in 1987, 20 percent in1988 and 15 percent thoreafter.

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for operational and maintenance costs of economic and social services Thecurrent deficit (net of external grants) is expected to be 0.9 percent ofGDP in 1987 and then slowly improve to a position of a nominal surplus by1990 (0.1 percent of GDP).

Table 4.8

Somalia: Medium-Term Bud2etary Prolections, 1987-91(Million So.Sh.)

1986 1987 1988 1989 1990 1991Budget ---------------Projected----------------

Current Revenue 8600.0 13550.0 19099.0 24040.0 29229.0 35758.0o/ws tax revenue 7540.0 11828.0 16674.0 20894.0 25147.0 30461.0Current Expenditure 10371.3 15298.5 19745.0 24491.6 28802.0 33696.6olwt Interest

(Cash basis) 1296.3 1651.0 1893.0 2126.0 2386.0 2671.0oviw Nonwage costs

of Sco.& Soc.sectors 522.3 4381.0 6308.0 8463.7 10428.8 11992.5

o/w: Civil Servicewages & salaries 760.2 1376.0 2075.0 3013.0 3465.0 3984.0

Current Deficit -1771.3 -1748.5 -646.0 -451.6 427.0 2061.4(excl. grants)

Memorandum Items

Comodity Aid 1 2125.8 3600.0 4200.0 4800.0 5100.0 5400.0Reschedulable Int. 21 3852.3 5309.0 5987.0 6154.0 6674.0 5729.0

As % of GDP

Current Revenue 6.2 7.0 8.0 8.6 8.9 9.1Current Expenditure 7.5 7.9 8.2 8.8 8.7 8.5Current Deficit -1.3 -0.9 -0.3 -0.2 0.1 0.5(excl. grants)

I/ Assumes that only 40 percent of total commodity aid is available for generalbudgetary support.

2/ This amount is in addition to the interest expenditure included in currentexpnditures abovo and represents the difference between interest on non-reschedulable debt and on total debt as shown in Table 4.5. For the budgetto meet entire interest expenditures would require additional assistance inthe form of debt relief and/or counterpart funds from commodity aid.

Sourcet Bank staff estimates.

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4.27 In ordtr to have a current account surplus (net of grants) by1990, the GOS will need to revise the basis of imports valuation for importduty effective immediately. Valuation at the single unified rate ofSo.Sh. 120 - US$1 is expected to result in, at least, a doubling of theimport duty revenues immediately upon revision in the import valuationpolicy.

4.28 Somalia's traditional dependence on import duties for the bulk ofits revenue will rise in 1987 from about 48 percent of total revenue toabout 52 percent upon unification of the exchange rate. However, thisdependence is expected to be reduced as collections from domestic directand indirect taxes rise. By 1991, import taxes are expected to contributeabout A9 percent of domestic revenuxes. Export taxes are expected to growmoderately as new export markets are established and improved revenuecollection reduces underinvoicing of exports. It is expected that aseconomic recovery continues, contribution to domestic revenues fromdomestic excise taxes (notably excises on sugar and cigarettes and matches)shall grow at a faster rate than before. With imposition of the recentsales tax, the share of total domestic indirect taxes shall grow from 15percent in 1987 to 19 percent. in 1991. The growth in all tax collectionsis inextricably linked to improved tax collection. It is expected thatwith the completion of the recently undertaken income tax survey, morepeople shall be brought into the income tax net -- notably small businessentrepreneurs, and tax structure would be revised to bring the income taxrates more in line with the current income levels.

4.29 Non-tax revenues, which are derived primarily from publicenterprises, are expected to rise from 12 percent in 1985 to 13.5 percentin 1991 as some public enterprises become viable in the wake of theanticipated public enterprise reform. However, the contribution to thebudget revenues is expected to be gradual as rehabilitation of major publicenterprises is expected to take two to three years.

4.30 On the expenditure side, costs of providing services are expectedto go up because of inflation. Recurrent costs are expected to go up from7.5 percent of GDP in 1986 to 8.5 percent in 1991. As budgetaryexpenditures are restructured in favor of economic and social services andcivil service salaries, it is expected that 40 percent of the estimatedrequired recurrent cost needs in the productive services would be providedfor in 1987; 50 percent in 1988; 60 percent in 1989 and 65 percentthereafter. This will raise the share of recurrent budgetary expenditurein the economic and social services in line with the average in Sub-SaharanAfrica. At the same time, the share for general services will becorrespondingly reduced to make resources available for more productiveuses. Expenditures on 'transfers' (which may include subsidies) areexpected to be gradually reduced likewise. Civil service salaries areexpected to go up 400 percent between 1986 to 1991, with restraint ondefense related expenditures.

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4.31 Provided the recommended measures are adopted, the current budgetcan be expected to show a nominal surplus (0.1 percent of GDP) by 1990 andmake a marginal contribution to the public investment program, which willtill then continue to be entirely financed by external aid. Also, thelocal currency counterpart generated by the commodity aid program will bemore than adequate to finance the current budget deficit without any needfor domestic bank borrowing, so that the Government will be well advised toimmobilize any surplus counterpart funds in a central bank account (assuggested earlier). In this regard the main issues for the budget will be(a) to capture all counterpart funds and hold them in the Central Bank, (b)to determine how much of these funds can be used without destroying thefiscal effort and the stabilization objective noted earlier on, and (c) tocontrol and limit the use of these funds only for such budgetedexpenditures. Beyond 1990, as the current budget generates a surplus,larger proportion of counterpart funds may be used to raise the present lowlocal currency component (12 percent) of public investment expenditure.

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SOMALIA: STATISTICAL ANNMU

Part I - Social Demographic Data

1.1 Social Indicator Data Sheet1.2 Select Demographic Indicators1.3 Age and Sex Distribution

Part II - National Accounts Data

2 1 Gross Domestic Product by Sector (Current Factor Cost)2.2 Gross Domestic Product by Sector (Constanc Prices)2.3 Expenditure on Gross Domestic Product (Current Prices)2.4 Expenditure on Gross Domestic Product (Constant Prices)

Part III - Trade and Balance of Payments Data

3.1 Balance of Payments3.2 Value of Exports by Major Commodities (Somali Shillings)3.3 Expo:ts by Commodity (U.S. Dollars)3.4 Number and Value of Livestock Exports3.5 Value of Imports by Major Commodities3.6 Direction of External Trade

Part IV - External Debt

4.1 External Debt Outstanding4.2 Debt Service Payments4.3 External Debt Arrears4.4 Average Terms of New Commitments4.5 Debt Service Obligations 1986-90

Part V - Public Finance

5.1 Financial Operations of the Central Goverm'awnt5.2 Central Government Revenue5.3 Functional Classification of the Central Government5.4 Central Government Wage Bill5.5 Functional Classification of Development Expenditure

Part VI - Monetary Accounts

6.1 Monetary Survey6.2 Summary Accounts of the Central Bank6.3 Summary Accounts of the National Commercial Bank6.4 Summary Accounts of the Somali Development Bank6.5 Loans and Advances by Economic Activity6.6 Somali Development Bank - Loans by Sector6.7 Interest Rate Structure6.8 History of Exchange Rates

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Part VII - Agricultural Sector

7.1 Production of Agricultural Crops7.2 Banana - Area, Yields and Exports7.3 Productions of Sugar Cane and Sugar7.4 Producer Prices of Major Crops7.5 Producer Prices Paid by ADC and Grain Purchases

Part VIII - Industrial Sector

8.1 Selected Data on Public and Private Manufacturing Industries8.2 Industrial Output of Selected Products8.3 Manufacturing Enterprises Performance Indicators

Part IX - Prices

9.1 Mogadishu Consumer Price Index9.2 Rates of Inflation9.3 Quarterly Movements in the CPI9.4 Retail Prices of Petroleum

Part X - Education

10.1 Prlmary School Enrollment by grade and Sex10.2 Secondary School Enrollment by Grade and Sex

73

Table 1. 1

1986 SOCIAL INDICATOR DATA SHEET

SOMALIAReforence Grouos (uQE)

MostRecont Low-income utio-i nccm

_ _ 1965se 1973 Estimate S-S Africa S-S Africs

LABOR FORCETotal Laooe Force (thou) t092.1 1477.1 1987.4

Femal (%) 30.1 29.5 28.4 35.7 37.5Agriculture (%) 61.1 78.2 7i5.5 a 78.9 59.4Industry (%) 6.3 7.4 8.4 a 7.6 14.8

Parttcipation rate IX)Total 37.5 38.5 38.0 38.9 36.2Male 53.0 54.8 53.9 50.4 45.8Female 22.3 22.5 21.8 27.5 26.7

Age aepencency ratio 1.0 1.0 0.9 1.0 1.0

HOUSINGAverage size of housenold:

rotalUrboanRural a Y 3...

Percentage of dwellings withelectricity:Total .. ..

UrbanRural

EUCATIONEnrollmenv ratest

Primary: Total 10.0 11.0 21.0 60.1 98.BMali 16.0 17.0 28.0 69.6 '07.8Female 4.0 5.0 15.0 51.3 90.7

Secondary: Total 2.0 5.0 14.0 12.5 21.0Male 4.0 8.0 19.0 18.5 28.5Female 1.0 2.0 10.0 9.0 16.9

Pupil-Teacher ratio:Primary 25.7 38.8 23.6 _ 45.1 42.5Secondary 16.5 22.4 19.9 c 23.0 27.7

Pupils reaching grade 6 (%) 59.6 808

INCOME. CONSUMPTION. AND POVERTYEnorgy consumption per cap.(kg of oil equivalent) 14.9 24.7 82.6 54.6 530.7Percentage of private incomoreceived by:m1ig1st 10% of hWoisetl5sHighest 20%Lowest 20%Lowest 40%

Est. absolute poverty incomolevel (USS per capit&):

Uroan 150.0 d 6896Rural 110.0 d 338.1

Est. pop. below absolutepoverty incomo levol (%)

Urban 40, 00Rural . 70.

Passenger cars/thou poo. 1.7 2. 36.0Newspaper circulation(per tmousana Ppoultion) 1.7 1.0 3.6 7.4

EPO uly '986

'wU I'fae'st .V VWy yg twW 2.62 ang I55, !373 :egwun lord Ott WIL6 &na -Ross "Oent eh'"tUmt 30two.ft 12 ana .085.a. :36. IL I .l"

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Table 1.1

1986 SOCIAL INDICATOR DATA SHEET

SOMALIAReference Groups (MRE)

MostRecent Low-mncome Mctl ncom@

195 1973 Estimate S-S Africa S-S Afelca

AREATotal land area (thou sctkm) 637.7 637.7 637.7Agricultural (% of total) 46.8 46.9 46.9

GNP PER CAPtTA (USS) .. .. 260.0 29.9 1025.3

POPULATION AND VITAL STATISTtCSTotal population (thou) 29t2.0 3840.0 5234.0uroan pou. (% of total) 20.1 25.1 33.3 20.4 33.1Population growtn rate(%):

Total 3.5 2.8 2.9 2.5Urban 6.4 5.4 6.2 4.8

Life exoect. at otrtn (yrs) 37.9 4t.1 45.7 48.2 $1.0Population projectiOns:

Pop, in 2000 (mill) 8.5stationary poe. (Mill) 30.4

Population Cotnsity per sQ kmof agricultural lar 9.6 12.8 17.5 55.9 45.6POP, age structure (%):

0-14 yrs 49.1 47.0 44.9 46.7 46.215-64 yrs 49.0 51.0 52.3 50.4 51.06a and above 1.9 2.0 2.1 2.9 2.3

Crudle birth rate (par thou) 50.0 50.0 49.3 46.3 46.3Crudte coatn rate (per thou) 25.7 22.9 19.6 18.3 15.6Total fertility rate 6.7 6.7 6.8 6.4 6.4tnfant mort. rate (per thou) 166.0 155.0 152.6 121.5 103.2Child d.eatn rate (per tnou) 37.0 35.1 32.4 25.7 17.6Family planning:

Acceotors, annual (thou)Us-rs (X of marriec women) 1.0 4.5 7.1

FO00 HEALTH AND NUTRITIONIndex of food production perCapita (1974-76 a 100) 107.6 106.5 65.t 89.5 89.3Por capita supply of:

Calories (% of retouirmnts) 91.5 09.7 59.3 90.0 94.2Proteins (grams per day) 76.5 72.0 63.5 52.6 50.6

PoP, por opysician (thou) 33.9 19.9 17.5 a 39.2 11.3Poo. per nurse (thou) 4.3 2.9 a 3.3 2.6Pop. per nosPI ta Ieo (thou) 0.7 0.7 *- 1.7 1.4Access to Safe water

(% of population): Total 15.0 33.0 a 25.2 65.8Urban 17.0 $5.0 a 61.6 70.5Rural .. 14.0 21.6 a 17.1 35.0

Population Growth Infant Mortolity Primary School Enrollment52 ~~~~~~~200

e....~~....... ~120.

0- - -' :: I g? t0 '560 sOMItOA 1s80

0~~~~~~~~~~~~~~~~~~~~~~~

0 SOMAL IA_________Q nesr rtr CtOSP f.lftS? ftfGrQ UP

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Definitions of Social Indicators

The definition of a particular social indicatof may Infant (age 0-IJ mortalit rate - Number of infantsvary among countries or within one country over per thousand live births who die before reaching onetime. For instance. different countries define -urban year of ap. in a given year.area" or safe watcr" in diffeint waya Child tage 1-4) mortality rate - Number of deaths

of children. ag 1-4. per thousand children in theAREA (thousand square kilometers) same age group in a given year. For most developingTotal - Total surface area comprising Iand area and countries thse data are derived from models usinginland watets. information on infant mortality rates..4gricltwral (percentage of toral) - Estimate of agri- Fmily planing - acceptors, (thousands) - Annualcultural area used for CropS, pastures, market nd number of acceptofs of birth-control measur re-kitchen gardens or to lie falow, as percentap of ceived under the auspices of a national family plan-total. ning prom.

Familv planning - usrs (percentage of married wom-GNP PER CAPITA (USS) - GNP per capita esti- en) - Prenatage of married women of child-bearingmates at current market prices cakulated by the age who are practang, or whose husbands areconversion method used for the World Bank Atlas. prctising, any form of contraception. Women of1986. child-bearing age ar generally women aged 15-49.

although for some countries contraceptive usage isPOPULATnON AND VITAL STATISTICS measured for another age group.Total population - midyear (millions)Urban popsdation (peretage of total) - Different FOOD, HEALTH AND NUITIONcountries follow different definitions of urban popu- lInx offoodproduction per capita (1974- 76 -100)lation. Such differences may affect comparability of - Index of per capita annual production of all fooddata among cm;atries. commodities. Production.excludes animal feed andPopulation growth rate (percent) - total and urbn - seed for agiculture. Food commodities include pri-Annual growth rates of total and of urban popula- mary commoditie (for example. sugarcane insteadtions. of sugar) which are edible and which contain nu-Life expectancy at birnt (ws) - Number of yeas a trients (for example tea and coffee are excluded).newborn infant would live if prevailing patterns of Commodities include nuts, fruits, pulses, creals,mortality for all people at the time of its birth were vegctables, oil -xds, sugarane and sugar beetsto stay the same throughout its life. livestock, and livestock products. Aregate produc-Population projections tion of each country is based on national average

Populaion in 200 - The projection of population producer price weights.given total population by age and sex, fertility and Per capita supply of caloriws (percentage of require.the demographic parameters of mortality rates. and mets) - Computed ftom energ equivalent of netmigration in the bas year 1980, until the population food supplies available in country per capita per day.reaches a stationary fate. Available supplies comprise domestic production,

Stationry populion . The projected popultion imports less exports, and changs in stock. Netlevel when zero population growth is achieved: i.e., supplies exclude animal feed, seeds for use in agti-the birth rate is constant and equal to the death rate. culture quantities usd in food procssing, and losswthe age structure is stable, and the growth rate is es in distribution. Requirements were estimated forzero. 1977 by the Food and Agricuture OrganizationPopulation denuitv. agricd;ural lnd - Population per (FAO) based on physiological needs for normalsquare kilometer (100 hectars) of agricultural area. activity and health considering body weights, envi-Population age structure (percent) - Children 0-14 ronmental temperature. age and sex distribution ofyears. working age 15-64 years, and people of 65 population.years and over as percentages of population. Per capita supply of protei ({grams per day) - ProteinCrude birth rate - Annual live births per thousand content of per capita net supply of food per day. N.,~population. supply of food is defined as above. Requirements forCrude death rate - Annual deaths per thousand all countries established by United States Depart-population'. ment of Agriculture provide for minimum allow-Thial l rtdijw rate - The avcrage number of children ances of 60 grams of total protein per day and 20that would be born alive to a woman during her grams of animal and pulse protein. These standardshleutnme if Juring her childbearing years she were to are lower than those of 75 grams of total protein andhear childrn at each aye in accordance wit',l presail- 23 grams of animal protein as an average for the,n .igespcctiic fertility rates. world. as proposed by FA.O

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Population per phksician - Population divided by group of individuals who share living quarters andnumber of practising physicians qualified from a main meals. A boarder or lodger may or may not bemedical school at university level. included in the househoid for statistical purposes.Population per nursing person - Population divided Nrcentage of dwellings with electricity - total. urban.by number of practising graduate nurses. assistant and rural -Conventional dwellings with electricity innurses. practical nurses and nursing auxiliaries. living quarters as percentage of all dwellings.Poputaton per hospital bed - Population divided bynumber of hospital beds available in public and pri- EDUCATIONvat, general and speciazed hospitals, and reha- Enrollment Ratesbilitation centers. Hospitals are establishments Primary School Enrollment - total, male andfemalepermanently staffed by at least one physician. Es- - Gross enrollment of all ages at primary level as atablishments principally providing custodial cae are percentage of primary school-age children. Whilenot included. many countries consider primary school age to beAccess to safe water (percentage ofpopulation) - total. 6-11 years, others have wider age groups. Differ-urban. and rural - People (total urban, and rwal) with ences in country practices in the ages and durationreasonable accss to safe water supply (includes treat- of school are reflected in the ratios given. For someed surface waters or untreated but uncontaminated countries with universal education, gross enrollmentwater such as that from sprngs sanitay wells and may exceed 100 percent since some pupils are youn-protected borcholes). In an urban area a public foun- ger or older than the country's standard primary-tam or standpost located not more than 200 meters school age.from a house may be considered within reasonable Secondary SchooI Enrollment - total. male andaccess of that house. In rural areas reasonable access female - Computed in a simiilar manner, but includeswould imply that members of the household do not pupils enrolled in vocational, or teacher traininghave to spend a disproportionate part of the day secondary schools, for pupils usually of 12 to 17fetching water. Absent and incotmpite responses, and years of age.large vaiations between countries, may affect the Pupil-teacher ratio -prinary, andsecondary -Totalvalidity of the overall results of the country and students enrolled in school divided by the totalregional comparisons. In additi certain defiitions number of teachers.and clsifications such as urban and rural, son Pfercentage pupils reaching grade six - The percen-able access to safe water in rural areas safe water tage of a cohort of 1,000 pupils starting primarysources (when they are not subject to laboratory school that persist into grade six.control) vary considerably from country to countryand thus affect comparability of the data. INCOME, CONSUMPTION, AND POVERTY

LABOR FORCE Energy consumption per capita (kilograms ofoil equi-Total labor force (millions) - Economically active valent) - Annual consumption of commercial pri-persons, including armed forces and unemployed but mary energy (coal and lignite, petroleum, natural

excl g h s ad s s Dgas, and hydro, nuclear and geothermal electricity).excloudin housewives are ndt studentse. Dfntosn Private income distribution - Income (both in cashvarious countries are not comparable.ankidacrngtpeetlerosofhu-Femak (percent) - Female labor fore as a percen- and kmd) acumg to percentile groups of house-tage of total labor force. holds ranked by total household income.Agriculture (percent) - Labor force in farming, Passenger cars (per thousandpopulation) - Includesforestry, hunting and fishing as a percentage of total motor cars seating fewer than eight persons; ex-labor force. cludes ambulances, hearses and military vehicles.Industry (percent) - Labor force in mining. construc- Newspaper circulation (per thowand population)tion, manufacturing and electricity, water and gas as Average circulation of "daily general interest news-a percentage of total labor force. paper," defined as a periodical publicationi devotedParticipation rate (percent) - total, male, andfemak primarily to recording general news. It is considered* Participation rates are computed as the percentage to be "daily" if it appears at least four times a week.of population of all ages in the labor force. These are Estimated absolute poverty income kvel (USS perbased on International Labour Office (ILO) data on capita) - urban and rural - Absolute poverty incomethe age-sex structure of the population. level is that below which a minimal nutritionallyAge dependency ratio - Ratio of population under 15. adequate diet plus essential nonfood requirementsand 65 and over, to the working age population (age are not affordable. These estimates are very approx-IS-64). imate measures of poverty levels, and should be

interpreted with considerable caution.HOUSING Estimated population below absolute povertr income.4verage sr:e of household (persons per household) - level (percent) - Percentages of urban and ruraltotal, urban, and rural- A household consists of a populations who live in "absolute poverty."

Table 1.2

SOHALIA - Select be!opraphIc Indiestora

I. &MaulatIoa Hale: 2,048,691 Female: 2,040,512 Total: 4,089,203

2. Sua Ratlo 100.4 sales to 100.0 feaales.

I. OlsutrI6atioa Urban: 25.4X Rural: 28.6X Nomadlc: 46.0X

4. C.Xl birth Rate 44-45 per 1,000

5. Ccuda DeaLit ItAte 13-15 per 1,000

b. I&ZbSt )iLrtality Rate 146-180 per 1,000 live birtlhs.

.. 1Iifu H&Pactaicy 45-49 years (both sexes)

U. )t_2d. Ai$a 4 st iarriage Hale: 24.6 Female: 19.5

¶9. I t Literate Nale: 61.0 Female: 48.0

14.. I.L,f rce Male: 74.9 (urban) 80.6 (rural)

Patilzife&tIoU Rate Female: 32.6 (urban) 44.5 (rural)

.. ,..L.: ~Atialyticail Volbtsue, Census of Population, 1984.

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Table 1.3

SOMALIA - Ass and Sex Distribution (). 1980 Survey

Urban Rural Noaic

Ages Grout male Female Male ?eoule Male Yesmle

0- 4 7.6 7.2 8.6 7.8 8.6 7.35- 9 6.4 6.9 8.2 7.8 8.9 7.9

10 - 14 7.5 7.0 7.3 6.2 8.5 6.91S - 19 7.3 6.9 5.2 5.6 5.9 5.620 - 24 5.0 4.7 3.2 4.0 4.4 3.125 - 29 3.2 3.5 .2.4 3.3 2.2 2.730 - 34 2.7 3.0 2.9 3.6 2.8 3.135 - 39 2.0 2.1 1.9 2.1 1.6 2.240 - 44 2.5 2.3 2.8 2.9 2.9 2.245 - 49 1.3 0.9 1.1 1.2 1.3 1.050 - 54 1.9 1.4 2.2 1.9 2.5 1.555 - 59 0.6 0.4 0.9 0.7 0.8 0.260 - 64 1.0 t.1 1.3 1.2 1.6 0.865 + 1.3 1.3 1.8 1.9 1.7 0.8

All Ages 51.3 48.7 49.8 50.2 53.7 46.3

Source: Analytical Volume, Census of Ponulatlon , 1984

PAGE 1TABLE 2.1

SOMALIA: GROSS DOMESTIC PRODUCT BY SECTORCURRENT FACTOR COST. t975-85(MILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

AGRICULTURE SECTOR 1 2,181.2 2.592.4 3,192.6 3,SS4.7 3,219.0 5,442.9 9,151.3 12,406.6 17,401.0 35,652.8 52,727.7…_,_____ - _ __ _ -______ -_ _ - - - - - - ________-________

CROP PRODUCTION 2 414.9 510.3 853.0 631.2 789.6 1.255.3 1,879.5 2.347.5 2.875.2 5.999.5 1t.015.8LIVESTOCK * 3 1,540.9 1.833.6 2,366.0 2,627.2 2.044.1 3.561.5 6,309.7 8,771.3 12,477.0 25,444.9 35,882.6FORESTRY 4 205.2 226.7 253.0 287.s 362.7 S82.5 876.0 1,171.8 1,923.1 3,795.6 5.343.4FISHING 5 20.1 21.8 20.6 8.8 22.6 43.6 86.2 116.0 125.8 412.3 485.8

OTTHER COMMODITY SECTORS a 503.6 639.5 826.9 711.8 942.7 1,505.0 2,210.1 2,750.9 3,199.0 5,475.0 8,088.7…_______ -------- -------- -------- -------- -------- -------- -------- -------- -------- --------

MINING AND QUARRYING 7 35.0 36.3 40.0 28.0 36.1 43.3 68.9 91.4 110.0 211.4 291.5MANUFACTURING 8 226.4 337.2 439.1 434.0 572.5 928.8 1,332.0 1,621.3 2,093.4 3,399.0 5,435.0ELECTRICITY 8 WATER 10 38.1 45.5 45.8 43.7 50.3 72.6 116.6 152.5 149.9 383.6 169.3CONSTRUCTION II 204.1 220.6 302.0 206.1 283.8 460.3 692.6 885.6 845.7 1,48t.0 2,192.9

DISTRIBUTION SERVICES 12 725.9 642.8 802.1 989.0 1,067.5 1,797.3 2,499.4 3,348.3 4,930.8 9,886.8 14,625.7

TRANSPORT & COMMUNICATION 13 318.5 271.5 324.8 301.2 364.9 771.2 988.5 1,403.1 1,944.0 3,795.6 5,598.87RADE(WHOL/RET).IIOTELS & RES 14 407.4 371.3 477.3 687.9 702.6 1,026.1 1.510.9 1.945.2 2,986.8 6,091.1 9,026.9

OTIIER SERVICES 17 615.7 728.9 867.0 1,314.2 1.583.4 2,442.9 3,024.0 3.959.6 5,844.7 11.439.3 16.076.0

REAL ESTATE/INSURANCE/BANKIN 18 228.2 268.0 311.5 451.0 554.2 669.2 1,181.8 1,694.3 2,396.8 4,804.4 6.874.3GOVERNMENT SERVICES 21 280.0 331.9 407.0 693.9 813.0 1,413.3 1,381.8 1,695.1 2,515.2 4,792.4 6578.6OTHER 20 107.5 129.0 148.5 169.3 216.2 360.4 460.4 570.2 932.7 1.842.4 2,623.1

GDP AT FACTOR COST 23 4,026.5 4,603.6 5,688.6 6.569.8 6,812.5 11,188.0 16,884.7 22.465.3 31,375.5 62,453.8 91,518.1…__, ___ -------- -------- -------- -------- _ ______ _____ __ --------

INDIRECT TAXES 24 448.4 478.3 649.6 919.1 1,287.8 1,145.9 2.149.6 2,184.9 2,944.9 2.537.1 4.899.3

GOP AT MARKET PRICES 25 4.474.8 5.081.9 6,338.2 7.488.9 8.100.3 12,333.9 19,034.3 24,650.3 34,320.4 64.991.0 96.417.4

1/ 198S ESTIMATES ARE PRELIMINARY.

SOURCE: MINISTRY OF NATIONAL PLANNING, NATIONAL ACCOUNT AGGREGATES' ANDAND STAFF ESTIMAFES.

TABLE SOM/2Nfi

PAGE ITABLE 2.2

SOMALIA: GROSS DOMESTIC PRODUCT BY SECTORAT CONSTANT 1977 FACTOR COST, t975-85

(MUILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 198t 1982 1983 1984 1985

AGRICULTURE SECTOR 31 2,747.1 2.845.7 3,192.6 3,225.7 2,361.7 2,511.7 2,920.0 3,229.2 3,320.8 3.541.2 3,799.1… - __ _ __ ___ __ _ ____ _ ___ _ _ _ --------

CROP PRODUCTION 32 522.6 560.2 5S3.0 572.8 579.3 579.3 599.7 611.0 548.7 595.9 793.7LIVESTOCK 33 1,940.7 2,012.7 2,366.0 2.384.0 1,499.7 1.643.5 2,0t3.3 2,283.0 2,381.1 2.527.3 2.585.4FORESTRY 34 258.5 248.9 253.0 260.9 266.t 268.8 279.5 305.0 367.0 377.0 385.0FISHING 35 25.3 23.9 20.6 5.0 16.6 20.1 27.5 30.2 24.0 41.0 3S.0

OTtlER COMMODITY SECTORES 36 634.3 702.0 826.9 645.9 691.6 694.5 705.2 716.0 610.4 543.8 S82.0…___ … __ ___. __ _ ___ ___ ____ _ --------

MINING AND QUARRYING 37 44.1 39.5 40.0 25.4 26.5 20.0 22.0 23.8 21.0 21.0 21.0MANUFACTURING 38 285.2 370.1 439.1 393.8 420.0 428.6 425.0 422.0 399.5 337.6 391.6ELECTRICITY 5 WATER 40 48.0 49.9 45.8 39.7 36.9 33.5 37.2 39.7 28.6 38.1 12.2CONSTRUCTION 41 257.0 242.2 302.0 187.0 208.2 212.4 221.0 230.S 161.4 147.1 158.0

DISTRIBUTION SERVICES 42 914.2 705.6 802.1 897.5 783.2 829.4 797.5 871.5 941.0 982.0 1.063.6 °__- - -------- ___-____ -__ - --_ -- _-- -- *----- -------- -------- -------- -------- -------- -------- I

TRANSPORT & COMICATION 43 401.1 298.0 324.8 273.3 267.7 355.9 315.4 365.2 371.0 377.0 403.4TRAOE(WIUL/RET).HOTELS 8 RES 44 513.1 407.6 477.3 624.2 51S.5 473.5 482.1 506.3 570.0 605.0 650.4

OITIER SERVICES 47 775.5 800.1 867.0 1.192.6 1.161.7 1.127.3 964.9 1,030.6 1,115.4 1,136.2 1,158.3

REAL ESTATE/INSURANCE/BANKIN 48 287.4 294.2 311.5 409.3 406.6 308.8 377.1 441.0 457.4 477.2 495.3GOVERNMENT SERVICES 51 352.7 364.3 407.0 629.7 596.5 652.2 440.9 441.2 480.0 476.0 474.0OTHER 50 135.4 141.6 148.5 t53.6 158.6 166.3 146.9 148.4 178.0 183.0 189.0

GDP AT FACTOR COST 53 5.071.1 5,053.4 5.688.6 5,961.7 4,998.2 5,162.9 5,387.6 5,847.3 5,987.6 6,203.2 6,594.0

INDIRECT TAXES 54 564.7 525.0 649.6 834.0 944.8 528.8 685.9 568.7 562.0 252.0 353.0

GDP AT MARKET PRICES 55 5,635.8 5,578.4 6,338.2 6,795.7 5,943.0 5,691.7 6,073.5 6,416.0 6,549.6 6,455.2 6,947.0

t/ EStIMATES FOR 1985 ARE PRELIM[NARY.SOURCE: MININSTRY OF NATIONAL PLANNING AND STAFF ESTIMATES.

TABLE $GM/2tJ/2

- PAGE 1TABLE 2.3

SOMALIA; EXPENDITURE ON GROSS DOMESTIC PRODUCT,CURRENT MARKET PRICES. 1975-85(MILLONS OF SOMALI SHILLINGS)

------------------------------------------------------------------------- __--__-----------------------------------------------------

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 *983 1984 198S

GROSS DOMtESTIC EXPENDtTURE 60 5.120.0 5,783.7 7,560.7 8,565.4 9,990.7 14,428.9 20,922.8 29.055.8 39,444.6 72.517.4116,479.1

CONSUMPTION 61 4.112.0 4.264.7 5,573.7 6.593.4 9,323.7 13,835.9 17.825.8 25.335.8 34.572.2 62.352.810t.7t7.6

PUBLIC 62 909.0 861.0 1,128.0 1,668.0 1,937.0 3.011.0 3,273.0 4.388.0 5,054.0 86448.8 11.647.2PRtVATE 66 3,203.0 3.403.7 4,445.7 4.925.4 7,386.7 10.824.9 14,552.8 20,947.8 29,518.2 53,904.0 90.070.4

DOMESTIC INVESTMENT 67 1,008.0 1,519.0 1.987.0 1.972.0 667.0 593.0 3,097.0 3,720.0 4,872.5 tO,164.6 14,761.5

GROSS FIXED CAP. FORM. 68 684.0 818.0 1,240.0 1.021.0 1,157.0 1.154.0 1.287.0 2.070.0 3,775.2 9,027.2 13.461.5BUILDING/INFRASTRUCTURE 69 348.0 362.0 477.0 350.0 396.0 394.9 440.5 708.4 1,245.8 3.159.5 4.S76.9EQUIPMENT 70 336.0 456.0 763.0 671.0 761.0 759.1 846.5 t.361.6 2.529.4 5,867.7 8.884.6

CHANGE IN STOCK 71 324.0 701.0 747.0 951.0 -490.0 -561.0 1.810.0 1.650.0 1.097.3 1.137.4 1.300.0

RESOURCE BALANCE 72 -645.2 -701.8 -1,222.5 -1.076.5 -1.890.4 -2.095.0 -1,888.5 -4.405.5 -5,124.2 -7.526.4-20.061.7

EXPORTS (GOODS) 73 557.7 509.9 448.8 689.3 667.3 844.8 717.6 1,680.8 1.586.2 1,344.8 6.740.1 *IMPORTS (GOODS) 74 -1,021.0 -1,108.5 -1,617.2 -1,734.3 -2,480.9 -2,902.0 -2,656.5 -6,331.1 -7.088.4 -8.806.1-26.585.2NON-FACTOR SERVICES (NET) 112 -181.9 -103.2 -54.1 -31.5 -76.8 -37.8 50.4 244.8 378.0 -65.1 -216.6

GDP AT MARKET PRICES 75 4.474.8 5,081.9 6.338.2 7,488.9 8,100.3 12,333.9 19,034.3 24,650.3 34.320.4 64.991.0 96,417.4

NET FACTOR INCOMtE FR ABROAD 110 1.9 7.6 13.2 22.0 15.7 -5.7 -28.3 -57.7 -75.6 -130.1 -125.0

GNP AT MARKET PRICES 11t 4,476.7 5,089.5 6,351.4 7,510.9 8.t16.0 12.328.2 19.006.0 24,592.6 34.244.8 64,860.9 96.292.4

SOURCE: NATIONAL ACCOUNT AGGREGATES. MNP AND STAFF ESTIMATES.

-1ABLE SOM/2N/3

PAGE 1TABLE 2.4

S04ALIA; EXPENDtTURE ON GROSS DOMESTIC PRODUCT.AT CONSTANT t977 PRICES, 1975-85

(MILLONS OF SOMALI SHILLINGS)

ITEM 1975 1976 t977 1978 t979 1980 198t 1982 1983 1964 1985

GROSS DOMESTIC EXPENDITURE 80 6,177.6 6,307.8 7.560.7 7,824.1 7,523.8 7.225.3 7,535.1 8,050.6 8,147.1 8.034.8 8.093.8

CONSUMPTION 81 4,908.1 4,640.4 5,573.7 6,034.6 7,034.4 6.95t.6 6.546.9 7,082.4 7,217.2 7,025.2 7,030.2

PUBLIC 82 1,144.8 945.1 1,128.0 1,513.6 1,421.1 1.389.5 1.044.4 1,142.1 964.5 839.2 839.2PRIVATE 86 3,763.2 3,695.3 4.445.7 4,521.0 5,613.3 5,662.2 5,502.6 5,940.2 6,252.7 6.186.0 6.191.0

DOMESTIC INVESTMENT 87 1,269.5 1,667.4 1,987.0 1.789:5 489.4 273.7 988.2 968.2 929.9 1,009.6 1,063.6

GROSS FIXED CAP. FORM. 88 861.5 897.9 1,240.0 926.5. 848.9 532.5 410.7 538.8 720.5 896.6 969.9,BUILDING/INFRASTRUCTURE 89 438.3 397.4 477.0 317.6 290.5 182.2 140.6 184.4 237.7 313.8 329.8EOUIPMENT 90 423.2 500.5 763.0 608.9 558.3 350.3 270.1 354.4 482.7 582.8 640.1

CHANGE IN STOCK 91 408.1 769.5 747.0 863.0 -359.5 -258.9 577.5 429.5 209.4 113.0 93.7

RESOURCE BALANCE 92 -541.8 -729.4 -1,222.5 -1,028.4 -1,580.8 -1.533.6 -1,461.6 -1,634.6 -1.597.5 -1,579.6 -1.146.8

EXPORTS (GOODS) 93 624.9 522.9 448.8 512.2 428.4 477.4 428.2 573.3 465.1 264.9 360.5IMPORTS (GOODS) 94 -990.3 -1,145.6 -1.617.2 -1,513.1 -1.948.9 -1.985.2 -1,926.3 -2.318.1 -2.178.8 -1.831.0 -1.482.7NON-FACTOR SERVICES (NET) t22 -176.4 -106.7 -54.1 .. -27.5 -60.3 -25.8 36.5 110.2 116.2 -13.5 -24.6

GOP AT MARKET PRICES 95 5,635.8 5,578.4 6,338.2 6,79S.7 5,943.0 5,691.7 6,073.5 6,416.0 6,549.6 8,455.2 6,947.0

NET FACTOR INCOME FR ABROAD 120 .2.4 8.3 13.2 20.0 11.5 -2.6 -9.0 -15.0 -14.4 -12.9 -9.0

GNP AT MARKET PRICES 121 5,638.2 5,S86.7 6,351.4 6,815.7 5,954.5 5,689.1 6,064.5 6,401.0 6,535.2 6,442.3 6,938.0

SOURCE: NATIONAL ACCOUNT AGGREGATES, MNP AND STAFF ESTIMATES.

TABLE SOM/2N/4

iPAE 1TABLE 3.1

SOMALIA: BALANCE OF PAYMENTS(MILLIONS OF US $ )

-- _---------------------------______---------__---------__---_--__-_-----______-----_________________-----__------------------------_

ITEM 1975 1976 1977 1976 1979 t196 t916 1962 1983 1964 t185------------------------------------------------------------- ________--------__-----------------------------------------------------

EXPORTS (F.O.B.) 33 88.6 61.0 71.3 109.5 106.0 134.2 114.0 136.9 100.7 62.0 92.SLIVESTOCK 55 57.0 47.9 47.6 90.6 75.3 t10.7 98.0 105.7 72.0 33.1 66.OBANANA 56- 12.9 14.0 8.4 9.4 11.6 8.1 6.0 14.0 15.0 14.1 12.0OTHERS S7 18.7 19.1 15.3 9.5 19.1 24.4 10.0 17.2 13.7 14.8 13.5

IMPORTS (C.I.F.) 34 162.2 176.1 256.9 275.5 394.2 461.0 422.0 484.0 450.0 406.0 362.0FOREIGN EXCHANGE 59 162.2 176.1 256.9 192.0 323.4 331.0 205.0 204.0 206.0 156.0 111.0GRANTS IN KIND 61 - - - 21.0 15.1 69.0 140.0 157.0 147.0 151.0 138.0LOANS IN KIND 62 - - - 62.5 55.6 61.0 77.0 123.0 97.0 99.0 113.0

TRADE BALANCE 32 -73.6 -95.1 -185.6 -166.0 -288.1 -326.8 -308.0 -347.1 -349.3 -344.0 -269.5

NON-FACTOR SERVICES (NET) 35 -28.9 -16.4 -6.6 -5.0 -12.2 -6.0 9.0 23.0 24.0 -3.0 -6.0TRANSPORT & INSURANCE 36 -2.9 -3.0 -1.4 -0.6 1.6 -5.3 1.3 -3.5 -9.6 -10.0 -10.5GOVERNMENT. N.E.I 39 -26.0 -13.4 -7.2 -4.4 -14.0 -0.7 7.7 26.5 33.5 7.0 4.5

RESOURCE BALANCE 31 -102.5 -111.5 -194.2 -171.0 -300.3 -332.8 -299.0 -324.1 -325.3 -347.0 -275.5________ ------- _ --- - - -- - - - - - - - W - - - - - - - - - - - - - - - - - - - - - - - -

INTEREST PAYMENTS 71 -1.0 -1.0 -1.0 -1.0 -1.0 -2.0 -10.0 -14.0 -21.0 -44.0 -43.0PRIVATE TRANSFERS (NET) 42 1.9 4.2 13.1 26.0 35.9 57.0 64.0 50.0 51.0 72.0 20.0

CURRENT BAtANCE 44 -101.6 -106.3 -182.1 -144.0 -26S.4 -277.9 -245.0 -283.1 -295.3 -319.0 -293.S

CAPITAL ACCOUNT

OFFICIAL GRANT AID 43 100.2 39.7 105.9 78.0 58.1 143.0 150.0 157.0 148.0 174.0 179.0DIRECT INVESTMENT 80 6.7 2.2 7.8 0.3 - - - - - - -

PUBLIC MaLT LOANS. NET 45 59.0 68.1 59.9 79.3 84.0 87.0 79.0 123.0 100.0 46.0 69.0DISBURSEMENT 46 62.9 71.0 63.6 84.0 87.1 97.0 93.0 131.0 107.0 106.0 114.0REPAYMENT 47 3.9 2.9 3.7 4.7 3.1 10.0 14.0 8.0 7.0 60.0 45.0

PRIVATE CAPITAL. NET 103 -18.4 1.2 10.8 7.0 23.0 2t.0 3.0 -36.0 -39.0 -40.0 -33.0(INCL. ERRORS AND OMISSIONS)

OVERALL BALANCE 104 48.9 2.9 2.3 * 20.6 -100.3 -26.8 -13.0 -44.1 -86.3 -139.0 -85.5

FINANCING ItO -48.9 -2.9 -2.3 -20.6 100.3 26.8 13.0 44.1 86.3 139.0 88.5

CENTRAL BANK 105 - -1.0 -1.5 -8.0 85.0 43.0 33.0 64.0 47.0 13.0 28.00/W USE OF FUND CREDIT 51 ^ - - - - 4.0 30.0 34.0 44.0 -3.0 32.0

PAGE 2TABLE 3.1

SOMtALIA: BALANCE OF PAYMENTS(MILLIONS OF US S )

------------------------------ ______------------------------ ______,- _--- __-- __----------------------------------------------------

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1934 198S

COMMERCIAL BANK. NET 106 -48.9 -1.9 -0.8 -12.6 15.3 -16.2 -20.0 -19.9 39.3 29.0 -31.SARREARS .107 - - - - - - - - 71.0 -58.0OEBT RELIEF tO9 - - - - - - - - - 26.0 150.0

MEMO ITEMS:

GROSS FOREIGN RESERVES 69 68.4 84.9 120.0 126.3 51.0 25.0 42.0 14.0 16.0 6.0 8.0IN WEEKS OF CASH IMPORTS 70 5.1 23.2 28.0 34.9 8.2 3.9 10.7 3.6 4.0 2.0 6.0

__________________________________________________________________________________.__________________________________________________

NOTE: DATA FOR EXPORTS AND IMPORTS BOTH ARE UNDERRECORDED.t/ PRELIMINARY ESTIMATES.3/ INCLUDES COUNTERPARTS TO VALUATION AoDJUSTMENTS.SOURCE: DATA PROVIDED BY THE CENTRAL BANK OF SOMALIA. IMF; AND STAFF ESTIKATE. c

TABLE SOM/38/2

- PAGE 1TABLE 3.2

SOMALIA: VALUE OF EXPORTS BY MAJOR COMMODITIESBASED ON FOREIGN EXCHANGE RECORD(MILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

BANANAS tt 80.9 88.2 53.1 59.0 73.2 51.2 -39.6 113.7 103.3 284.4 533.0LIVE ANIMALS 12 358.7 301.8 299.5 570.4 474.1 639.5 1.001.9 1,516.9 1,122.1 514.4 2,604.0MEAT AND MEAT PRODUCTS 13 59.3 37.1 32.1 0.7 7.3 6.5 2.6 0.3 2.7 - -HIOES AND SKINS 14 20.7 44.4 23.6 29.7 56.4 41.8 18.5 56.2 20.9 74.8 7.4FISH AND FISH PRODUCTS tS 17.4 23.3 21.2 4.3 2.7 1.5 9.6 35.2 33.0 7.6 169.2MYRRH 16 14.3 11.3 11.9 14.8 21.0 61.5 28.8 50.5 89.9 49.3 172.8OIL 9 - - - - - 61.0 - 58.8 42.7 89.6 63.0OTHER 17 6.3 4.1 7.7 10.2 32.7 15.4 2.9 4.7 8.4 76.1 26.5

TOTAL 18 557.6 510.2 449.1 689.1 667.4 878.4 1,103.9 1.836.3 1.423.0 1.096.2 3.575.9

SOURCE: CENTRAL BANK OF SOMALIA

TABLE SOM/3T/2

- 86 -

Table 3.3

Somalia: Exports by Commodit-. 1980-85(In millions of. US2j

1980 1981 1982 1983 1984 1985

Live Animals 101.7 98.0 105.7 72.0 33.1 66.0Bananas 8.1 6.0 14.0 15.0 14.1 13.0Fuel Oil 9.8 - 3.9 3.0 4.3 1.6Meat & Meat Products 1.1 0.4 - 0.2 -Fish & Fish Products 0.3 0.9 3.0 2.3 0.4 0.2Hides & Skins 7.0 2.3 6.3 1.5 3.9 4.3Myrrh 3.7 3.7 3.7 6.3 2.4 3.9Other 2.5 2.7 0.3 0.4 3.8 3.5

Total 134.2 114.0 136.9 100.7 62.0 92.5

Source: Somali authorities and IMF.

87-

Table 3.4

Somalia: Number and Value of Livestock Exports. 1976-86

TotalTotal Value, f.o.b.

Sheep Goats Cattle Camels Livestock (Millions of('000) ('000) ('000) ('000) ('000) So. Sh.)

1976 385 381 58 34 858 301.91977 465 462 55 33 1,015 299.51978 739 715 77 22 1,553 570.61979 717 705 68 13 1,503 474.11980 745 736 143 17 1,641 639.51981 685 680 116 15 1,496 1,001.91982 730 719 157 15 1,621 1,511.91983 569 557 54 8 1,188 1t129.31984 389 362 8 4 763 670.81985 709 749 42 7 1,507 5,247.61985 2 34 34 -- -- 681986 2 81 82 3 1 177

!/ Exchange transaction records.2/ Through February.

Source: Ministry of Livestock, Central Bank of Somalia, and IMF.

PAGE iTABLE 3.5

SOMALIA: VALUE OF IMPORTS BY MAJOR COMMODITIESBASED ON FOREIGN EXCHANGE RECORD(MILLIONS OF SOMALI SHILLINGS)

ITEM 1977 1978 1979 1980 1981 1982 1983 1984 1985

FOOOSTUFF 150 145.0 58.2 222.6 274.9 224.0 557.6 453.7 267.5 716.38EV & TOBACCO 151 44.2 62.7 62.4 48.4 15.7 57.6 112.1 79.4 43.5TEXTILES/H.GOODS 152 16.9 34.3 26.4 20.9 23.7 22.5 36.2 37.3 70.4MEDICINES/CHEN 153 43.5 33.8 44.3 143.7 49.4 70.0 126.1 64.4 40.0MFG RAW MATERIALS t54 46.2 61.0 66.5 29.7 48.2 75.9 127.4 66.4 47.9AGRI. INPUTS 155 1.7 2.7 22.8 30.5 8.4 1.4 20.0 0.2 -PETROLEUM 156 100.7 14.5 281.3 410.3 452.4 991.9 881.5 902.7 1,496.4CONST MATERIAL 157 41.1 29.0 49.8 32.4 58.7 203.2 336.8 193.0 653.0MACHINES & PARTS 158 156.6 181.9 205.2 240.2 141.2 219.8 209.5 293.1 567.0TRANSPORT & PARTS 159 125.6 126.8 342.2 236.5 128.2 157.4 211.3 145.6 594.7FARM MACHINES 168 - - 230.9 142.6 6.9 12.7 6.9 12.1 1.2OTHERS 170 434.2 595.0 264.2 129.3 41.9 54.0 322.9 155.3 120.0

TOTAL 169 1.155.7 1.199.9 1,818.6 1t739.4 1,198.7 2,424.0 2,844.4 2.217.0 4,350.4

SOURCE: CENTRAL BANK OF SOMALIANOTE: THIS DATA IS BASED ON FOREIGN EXCHANGE DATA COLLECTED BYTHE CENTRAL BANK OF SOMALIA. IT EXCLUDES IMPORTS THROUGHi THEFRANCO VALUTA SYSTEM AND FOREIGN CURRENCY ACCOUNTS.

TABLE SOM/3T/10

-89-

Table 3.6

Somalia: Direction of External Trade, 1980-84

(In percent of total exports and imports)

1980 1981 19?2 toil _ _ _Exporcs IMports Exports liports txports Imports txports Lmports lxpurta :aports

Industrial countries 16.2 71.4 9.5 66.4 16.2 66.0 15.5 S6.6 9. 06.7Of whichtFrance 0.4 7.5 0.7 2.7 0.4 1.6 0.2 2.3 1.0 4.8Germany 1.4 4.8 0.1 7.2 O.S 7.2 0.4 6.1 _ 5.2Italy 12.9 34.6 6.3 22.4 13.4 33.9 14.1 28.1 5.8 21.3Japan - 1.3 -- 1.4 -- 0.7 -- 3.0 -- --United Xtngdom- 0.2 7.9 1.2 6.4 0.9 5.0 0.6 7.4 1.5 4.9Uniotd States 0.2 9.2 0.1 14.5 0.6 10.8 -- 12.0 1.0 20.3

Oil exporting countries 79.2 7.8 76.3 8.8 70.8 l.1 68.9 1J.- 62.S 17.7Of vhichtSaudi Arabla 69.9 5.5 71.9 5.8 65.6 15.3 65.8 15.5 59.1 12.6

Afrtce 1.1 10.7 1.4 4.6 0.8 3.9 0.8 4.1 --Of vhtich

Djibouti 0.8 4.4 0.8 3.4 0.7 2.9 0.6 2.9 -- 3.3tny, 0.3 4.0 - 1.1 - 0 .9 -- 0.9 -- 1.0

Asia 0.7 7.1 1.7 11.0 2.2 9.6 5.1 .0 .0 8.,Of whicht

China, People'sRepubitc of 0.5 2.1 1.2 3.7 2.0 4.5 2.6 2.3 S.4 2.7

Pakistan - 1.0 - 1.0 - 1.0 - 1.0 - 1.0ThailAnd - 0.9 - 4.5 - 2.4 - 0.6 2.9

Middlo east 2.7 0.3 10.8 5.7 9.5 0.9 9.2 0.9 18.9 1.0of which:

osemn Arsb Republic - -- 8.2 - 7.2 - 7.0 -- 11.5 -moens People'sDemocratic Republic 2.1 _ 2.5 - 2.2 - 2.2 - 2.6 -

U.S.S.R. andEastern Europe _ . - 0.4 - 0.3 - 0.3

Other 0.1 0.1 0.2 0.4 0-3 0-1 0.7 1.5 1.?

Total 100. W l.0 0 100.0 ]&g0. 100.0 100.0 100.0 lO.Oa

Source: MNs Direction of Trade Yearbook 1984 and 1985; most data are derived from partner countrtes.

-90-

Table 4.1

Somalia: External Debt Outstanding. 19809-65

(In millionu of U.S. dollars; *nd of period)

1969 1961 1982 1908 1984 19S5

It. AcencTfis - ~ 294.6 861.7 432.1 476.0 531.4 457.6

1. Multilateral 14S.0 214.4 260.9 290.9 321.4 828.7

African Dev. Bank 2.8 2.5 2.2 1.9 1.9 4.3African DOv. Fund 7.4 7.1 11.0 17.1 24.1 30.9Arab Fund 40.0 51.0 87.8 78.2 76.2 76.0EEC/EIB 6.4 5.4 5.4 5.6 5.0 6.2IDA 72.2 91.2 107.7 124.1 143.3 164.0IfAD - 1.1 2.9 5.3 9.6 3.5Islamic Dov. Bank 7.6 29.2 28.6 22.8 22.8 4.5OPEC Fund 9.8 28.9 36.8 35.7 35.7 39.3

2. Bilateral 148.5 167.3 171.2 186.1 210.0 134.1

Kuwait Fund 30.7 87.6 41.4 54.8 78.2 82.5Soudi Fund 117.8 129.8 129.8 130.3 138.8 61.8

II. Countries 380.5 406.7 433.9 456.6 490.3 869.1

1.. OECD 48.1 60.7 101.4 121.5 126.6 197.8

France - - 5.7 15.1 16.5 38.8Italy 1.0 14.0 19.5 18.7 21.9 196.6USA 47.1 46.? 76.2 87.7 89.1 46.0Japan - - - - - 6.8

2. Other 222.8 236.7 223.4 224.8 262.2 251.8

Abu Dhabi 74.8 88.9 89.6 101.9 101.9 191.9China 110.3 110.0 97.6 98.0 119.8 119.8Iraq 29.8 28.1 26.4 18.4 16.5 18.5Other 1 8.1 9.7 9.9 9.9 24.0 13.6

8. Special 109.6 109.3 199.1 109.5 109.5 109.5

Bulgaria (est) 6.0 680 6.0 68. 6.0 6.0USSR 103.0 103.3 103.1 103.5 103.5 193.6

4. Paris Club 1965 121.0

TOTAL, EXCL. IMF/AMF 676.0 ?88.4 868.0 991.8 1029.7 1137.9

IMP 17.8 46.8 79.6 122.7 112.8 142.4AMf 5.7 31.2 37.7 43.2 43.2 49.5

Suppliers Ciedits - 104.1 103.6 103.3 103.3 212.9Financial Institutions - 25.1 59.5 59.6 59.6 -

GRAND TOTAL 698.5 996.4 1148.4 1280.5 1346.5 1642.7

1/ Includes Algeria, Romania, Denmark, Libya and Yugoslavia.

Source: Somali Authorities, IMF and staff estimates.

Table 4.2Sonalta: Debt Service Payments, 1980-85 1/

(In millions of U.S. dollars)

1980 1981 1982 1983 1984 1985Prov.

Amortizatton 6.9 14.3 10.0 8.9 64.0 2/ 61.0 31Of which: --) I-) () () (34)f (16.0f

Arah Monetary Fund () (-) () (~) (-) (5.5)

Interest 1.3 10.3 13.8 20.6 44.0 4/ 49.0 S/Of which: IMF (0.4) (0.4) (3.3) (5.2) (4.7f (13.OF

Arab Monetary Fund (--) (-) C--) (--) (--) (5.1)

Total 8.2 24.6 23.8 29.5 108.0 110.0

Total (excluding IMF and AMF) 7.8 24.2 20.5 ' 24.3 99.9 70.4

Hemoranduim Items:

Debt service ratio 6/ 4.1 10.4 12.5 17.6 57.5 68.1(ExcludIng IMF and AMF) (3.9) (10.4) (10.8) (15.7) (53.5) (43.7)

Source: IMF, Recent Economic Development, Septeniber, 1986

I/ On meditum- and long-term public and publicly guaranteed debt; 1980-83 data on a cash basis;1984-85 data on an accrutal basis.2/ On a cash basis, US$4 millton.3/ On a cash basis, US$27 million.4/ On a cash basis, USt7 million.5/ On a cash basts, US$23 million.6/ As percent of exports of goods and services (including workers' remittances).

- 92 -

Table 4.3

Somalia: External Debt Arrears(Millions of US Doll-ars; End of Period)

1984 1985

I. AGENCIES35.627 22.563

1. Multilateral 20.220 18.441African D-v. Bank 0.45 0.114African DQv. Bank 0.19 _Arab Fund 4.41 11.878EEC/EAB _ _IDA 0.696IFADIslamic Dev. Bank 12.78 0.643OPEC Fund 2.39 5.109

2. Bilateral 15.407 4.122Kuwait Fund 1.97 0.617Saudi Fund 13.44 3.505

II. COUNTRIES 168.68 125.81

1.OECD 54.84 -France _Italy 54.84USAJapan

2. Other 55.743 58.149Abu Dhabi 37.62 40.097Algeria - 0.116China 13.33 16.666Iraq - -Romania (east) 0.64 1.270Yugoslavia 4.16 -

3. Special 58.11 67.66

Bulgaria (east) 3.45 4.007USSR 54.66 63.655

TOTAL ex. IMF/AMF 204.311 148.374

IMF - 15.194AMF 4.49 10.277

Credit Lyonnais 5.583 -

GRAND TOTAL 214,385 173,845

Source: Data provided by Somali authorities and staff estimates.

- 93 -

TABLE 4.4SOMALIA: AVERAGE TERMS OF NEW COMMITMENTS

BY CREDITOR, 1980-85

TYPE OF CREDITOR 1980 1981 1982 1983 1984 1965

BILATERAL LOANSInterest Rate () 3.7 3. 3 1.6 2.1 0.0 )-Maturity (years) 19.8 29.6 26.9 22.2 21. UGrace period (years) 6.2 8.1 8.5 4.1 6. C)Grant element (%) 40.4 53.0 63.7 45.4 6q9. --

MULTILATERAL LOANSInterest Rate (%) 0.8 4.8 2.1 3.0 0.3 0.)Maturity (years) 27.9 12.2 25.7 36.1 49.6 42.9Grace period (years) 6.1 5., 5.1 7.6 10.1 83 Grant element (X) 58.2 26.6 51.6 57.4 33.1 .1

SUPPLIERS CREDITSInterest Rate (7.) -- 8.0 -- -- -- --Maturity (years) -- 5.9 Grace period (years) -- 0.4 -- -- -- --

Grant element (-.) 4.6 --

FINANCIAL INSTITUTIONSInterest Rate (%) -- 7.7Maturity (years) -- 11.5Grace period (years) - 1.5Grant element (%) -- 9.0

TOTAL ALL CREDITORSInterest Rate (%) 2.0 5.9 1.8 2.5 0.2 0.8Maturity (years) 24.6 13.4 26.4 28.1 28.9 42.9Grace period (years) 6.1 3.9 7.0 5.6 7.1 8.8Grant element (/) 51.0 22.9 58.6 50.5 7:3.5 78.1

SOURCE: World Bank Debt Reporting System

- 94 -

Table 4.5August 8, 19 86 SOMALIA: EXTERNA DEBT sERVICE OBLIGATIONS, 1986-90 1/

correct±Oh1Z ~~(In thousands of U.S. dollars)

L' k itm M 4 3357. 3354.3 7940143 3032 %si2a. VMu. 2095. 50325A. 5952. 14934.1 74457.0 31164.1 M194.3 5143.

0. IltiSateral *43. 22559.1 62V12. MUM1. 19164.1 0356.2 1291.1 17M11. 90133. 404. 5126. 6233 ML62. 9469.6 39622.

AMrC" kw,. lot 406.4 43L.0 344.9 677.9 567.2 12451 67.4 493. 1136.0 671.9 423L9 1506.9 W.49 339. 0 .7Angem aW. Fand 67.1 25.2 324.7 16.1 329.5 445.6 132.1 361.6 4937 IRA. 366.4 553. 33S3.0 4.1 69.3

Arab Few 3733.3 33954 7643.1 5662 26653 030.5 WA0. 3249.7 9753. 532.9 3721. VMS. 1026W 3VW HU73.Evaem IaWot. Oak L.g 25.4 2.4 0.0 36.7 36.7 29.2 39.5 241.1 264.1 33.5 242.6 734.6 31.S 3235

155 363.3 1637.2 2500. 1536.9 1724.7 2361.6 5303. 57463 3344.4 5427.2 1744.9 3112.0 1629.2 1739. 316.0an1 0 573.5 173. 0.O 23.4 23.4 L*O 247.3 247.3 9.4. 275. 36. 31557 279.3 635.0Islamic toy. bib 423.5 211.5 634. 4235 200.7 624.2 42.5 510.4 613.9 423.5 136.0 603. W17. 171.0 546.5gm P.6 3502.5 135. 36375 3332. 116.6 3619. 3502.5 5.2 35. MU2. 71. 328.4 3502.5 65.6 3564.SIfled. Tfut F.i) 234". 1394. 4133.W 9.0 0W 5033. 40135.0 3329.0 335. 46690.0 =16. 54W$. 43310.0 14933.0 2665. 51595.0Arb t Ut.5w Fad 2533. 2900.0 23L 2316.0 2921. 215M.0 21917. SW5. 332.0 5.0 0.0 0.0 LO LO LS0

L. SietwaI n21.4 2735. 4305. 95732 32M4 124U. 15122 3434 W31.0 1732 2617.5 12W3. 391.5 2346.7 1O242.

1031 FOl 1313.1 1522.6 W55.7 3672. 1354.9 332.3 3672.9 131&33.65L6. 3612.9 1337.3 5010.2 3991.2 1273.6 5269.

SUdi Fad 5900.3 1565.5 L 7453500.3 I531.5 7437.3 59433 S46UM 135. M30. 5310.2 726.5 5900. 126.6 756.

15'. Catrim 61396. 39254.1 $60650.9 62335 30141.5 1303.0 6530.0 2731.0 1252a 64675.3 24566 3951.9 613151.3 52397 I1WL$

L. 10 cemb in 22202 1454.1 41594.3 200454 13MI39393747.3 2300. 17615. 39711. 2657.6 1633.5 4695.1 M24C. 1432.0 46010.

Itm 2313.0~VM 333. 5346. 2775. 3677. 6252 3523. 315.3 65533 3191.* 276. 6355. 3074.5 Z335.39 L53

Jtaly 16672. AU63360253.1 15a31.1 5024. 2545.1WW 149 3.1 L 2630.? 17354. 4615.2 2203.1 119L. 335. 2533.1la400 L0 44.3 44.3 5.0 149. 149.5 LS0 SW9. 38j. 3.0 194.3 394 360 3I.3 - 394.3M3 30344 9609. 5264.1 3641.6 9247. 125.3 3613. 3915U 1391. 3620. 359.2 52212. 4190. 33239 512.2

L A. ais 25 1.3 W.8 29935.5 24165.7 413R1.536. 20L6 366. 3617.4 J333.5 374.4 2713. 1139A.4 214W -.=LI.

No ii 1012L.0 239.7 12933. 50125.1 2453.7 12513. 053.1 2066. M21L3O 0125.1 1643. 11713.3 101. 1233.1 1133.movie 130.0 54.0 514.0 100.0 12. 152.0 135. 10.0 115.0 1SO.$ LO 5000 100. 6.0. 1I6.P4. of 05. 3275. 5.0 3275. 335. 3.0 1535. 1694.9 5.6 10974. 10974.9 5019495123 9036.Iraq 2351.1 3342.5 5643. 261. 96.1 3025. 010 2. 765 25. Mi20.2 13.0 31.0 95.4 259.4baul. 4611.0 512.0 6064.0 2525.9 W93. 316. 1013. 451.1 15114.5 361.3 440.7 242.0 64I10 335 j12.

WI.sd 5031.2 243.6 524.3 5031.2 1624 1193.6 1031.2 131.5 15UL? 5031.2 100.5 1131.7. 1031j 69A.6. .1100

W.ms raliaf .Vi 7060.3 139. 16957.3 1064.2 5166. 12315.0 706.2 4614.1 11671.9 4215. 402. 327.5 LO 316E 1335.6

Froaca 13.4~~ 796.1 374.5 10.4 W7.4 63L.3 13.4 54L.7 62.1 71.5 540.1 611.6 0.0- 33,~i 536.

Itels 5550.4 2445.2 3501.6 1110.4 1612. 2792. 1116.4 1660.2 277.6 HI00, 16318. 273.4 .5.0 1656. V1.SILL 566.5 44447 10514.2 5564.5 1152. 6137. 5664. 624.0 135.5 23322 25.6 2957.3 5.0 .A 5.0U.LA. 211.0 2116.5 232.5 210.9 5304.5 20)5.4 210.9 5131.3 5912. 250.9 1753. 1j69. 5.0 116. 1736.0

3L SpKtal bilawdre 50619.0 1533. 12157.7 1030.2 193.7 1255. 106002 5533.7 513339 100002 1M3. 1253.9 503332 55357.1 .223.

hlgwte 426. 0.0 42.5 607.7 LO 607. 607. 0.0 607.7 607.7 0.6 607. W07?' 5. 60.7.

U.S.S.R 10592.5 1531. 15731.2 50192.5 193.7 .15731.2 10112. 1533.7 11731.2 50192.5 153L. 15731.2 10192. 153L7*, 1173.2

Ill. Tit,! J01753.2 ML$2. 113363.2 136972.3 52174.6 59149.3 14730.3 43051.3 51975.6 124190.2 391907 163935. 502354 3434.1. 13519.2

1/Covers medium and long-term debts only; service obligations on external debt

outstanding at end-1985.

2/ 1985 Paris Club rescheduling.

Source: Ministry of Finance, External Debt Unit.

PAGE ITABLE 5.1

SOMALIA: FINANCIAL OPERATIONS OF THE CENTRAL GOVERNMENT. 1976-86(MILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

lOTAL REVENUE 266 628.4 670.7 890.0 1,419.6 1.526.0 1.421.4 2.262.6 2.759.6 4,252.5 3,978.7 5,220.0

TAX REVENUE 2 544.7 576.4 708.6 1,228.2 1,377.1 1,242.1 2,067.3 2.477.9 3,463.5 2,979.9 4.582.4NONIAX REVENUE 3 83.7 94.3 181.4 191.4 148.9 179.3 183.3 109.7 611.0 793.8 637.6TRANS FROM LOCAL GOVT 260 - - - 12.0 172.0 178.0 205.0 -

TOTAL EXPENDITURE 6 672.6 1,611.8 1,622.5 2.371.1 3,244.0 3,204.0 2,580.8 3.252.6 5,214.1 8.801.5 11.290.0

ORDINARY EXPENDITURE 263 859.3 649.3 801.8 1.361.5 1,572.9 1,670.0 2.295.0 2,750.0 4,539.0 7,965.0 9.918.0TRANS TO LOCAL GOVT 269 - - - - - 132.0 - 155.0 177.0 175.0 -

CURRENT ACCOUNT BALANCE 272 69.1 2t.4 88.2 58.1 -46.9 -380.6 -32.4 -145.4 -463.5 -4.161.3 -4.698.0

BUDGETARY DEV. EXPEND. 2/ 8 113.3 165.5 21t.4 186.9 224.2 162.0 285.8 347.6 498.1 66t.5 t.372.0O1W DOMESTIC FUNDING 261 113.3 165.5 211.4 186.9 224.2 162.0 285.8 347.6 498.1 604.0 911.5O/W CIP AIO 262 - - - - - - - - - 57.5 460.5

EXTRABUDGETARY EXPEND. 3/ 9 - 797.0 609.3 822.7 1,446.9 1.240.0 - - - - -

OVERALL SURPLUS OR DEFICIT(-) 10 -44.2 -941.1 -732.5 -951.5 -1.718.0 -1,782.6 -318.2 -493.0 -961.6 -4.822.8 -6.070.0

FINANCING: 11 44.2 941.1 732.5 951.5 1,718.0 1,782.6 318.2 493.0 961.6 4,822.8 6.070.0

FOREIGN (NET) 5 233.9 497.5 953.1 562.1 797.7 t.098.6 -22.8 667.0 1,256.6 2,257.9 5,025.0O/W GRANTS 12 3.0 157.5 576.4 60.2 270.6 482.0 435.0 1,056.0 1.106.0 1,980.0 6,620.0

DOMESTIC (NET) 13 -189.7 443.6 -220.6 389.4 920.3 684.0 341.0 -174.0 -295.0 2,565.0 1,045.0BANKING SYSTEM (NET) 14 -189.7 362.6 -222.2 408.9 920.3 671.0 347.0 -150.0 -295.0 2,573.0 875.0OTHER 15 - 81.0 1.6 -19.5 - 13.0 -6.0 -24.0 - -8.0 170.0

MEMO 1lEMS:

FOREIGN FINANCED PIP 271 - - - - 875.8 1.168.0 1,139.2 2,113.4 1,421.9 2,520.0 6,568.0

I/ NET OF AMORTIZATION PAYMENTS.2/ DEVELOPMENT EXPENDIIURE FINANCED FROM DOMESTIC SOURCES ONLY.3/ RESIDUAL ITEMS CONSISTING MOSTLY OF THE EXTRABUOGETARY EXPENDITURE BY SOME

MINISTRIES AND NET LENDING TO PUBLIC ENTERPRISES FOR PROGRAMS NOT INCLUDEDIN THE DEVELOPMENT PROGRAM. IN 1975 AND 1976 THESE EXTRAORDINARY EXPEND.INCLUDED DROUGHT REHABILITATION EXPENDITURE FINANCED BY THE PROCEEDES OFSALES OF COD-ODITY AID.

NOTE: DUE TO THE EFFORTS TO IMPROVE THE FISCAL DATA BASE. THE NUMBERS ANDPRESENTATION MAY NOT CONFORM TO THAT OF EARLIER REPORTS. THETOTALS FOR ORDINARY EXPENDITURE DIFFER FROM THE TABLE ON

FUNCTIONAL CLASSIFICATION FOR FEW YEARS ON ACCOUNT OFDEFENCE SALARIES.SOURCES: MINISTRY OF FINANCE o'. IMF. & CENTRAL BANK OF SOMALIA.

PAGE 1TABLE 5.2

SOMALIA: CENTRAL GOVERNMENT REVENUE. 1975-85(MILLIONS OF SOMALI SHILLINGS)

----------------------------------------------------------------__-----------__-----------------------------------------------------

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

TOTAL REVENUE 4 628.4 670.7 890.0 1,419.6 1,526.0 1.421.4 2.250.6 2,587.6 4,074.5 3.773.7 5,220.0*u.mwu u.~. w..w uS ........ ......... .. .....nSse.S wui.Umm..... .u.............u.. ..... ....in.. ... .......s...... u U .UuUuUuU...

TAX REVENUE 2 544.7 576.4 708.6 1,228.2 1.377.1 1,242.1 2.067.3 2.477.9 3.463.5 2,979.9 4.582.4-am inwu. u..n.= fhs-.u. .u.,4..u-. o.s.au=. ..... .uuinin unuwsu.. ama..... ........ WUU .........

DIRECT TAXES 122 109.1 tt3.6 136.5 193.4 2t3.6 211.3 353.4 420.6 S28.2 439.9 482.9

TAXES ON NET INCOME 16 45.2 54.0 59.1 74.4 90.8 94.6 145.8 133.3 269.2 302.7 311.4TAXES ON EARNED INCOME 17 40.8 47.4 55.1 63.0 83.0 86.2 113.2 90.5 94.7 123.5 141.7TAX ON WAGES 18 17.6 21.3 25.3 32.1 38.7 40.6 59.3 78.2 94.4 123.1 141.5EXTRAORDINARY TAX I/ 19 23.0 26.1 30.5 35.9 44.3 45.6 53.9 12.3 0.3 0.4 0.2OTHER INC04E TAXES 20 4.4 6.6 3.3 6.4 7.8 3.4 32.6 42.8 174.5 179.2 169.7

TAXES ON PROPERTY 21 10.5 12.3 16.0 45.0 60.5 67.2 142.2 84.5 166.5 136.1 166.5REGISTRATION TAX 22 10.5 12.3 16.0 45.0 60.5 67.2 142.2 84.5 166.5 136.1 166.5

ENTERP. TURNOVER TAX 3/ 37 53.4 47.3 61.4 74.0 62.3 49.5 65.4 202.3 92.5 1.1 5.0 C

INDIRECT TAXES 123 435.6 462.8 572.1 1,034.6 1,163.5 1,030.3 1t713.9 2,057.3 2,935.3 21540.0 4,099.5

TAXES ON GOODS & SERVICES 23 148.1 164.8 179.6 227.1 71.0 139.0 312.5 472.0 304.? 456.7 1.129.2SUGAR S SPIRITS 24 93.2 1OO.O 78.2 96.5 19.6 51.0 196.7 323.2 106.5 177.6 326.5FISCAL MONOPOLIES 25 49.6 60.0 96.3 118.6 18.1 55.0 5S.8 33.7 116.3 93.1 245.4MOTOR VEHICLE TAXES 26 1.3 1.3 1.3 2.8 4.8 6.1 6.3 7.4 10.4 7.2 9.1SALES TAX 176 - - - - - - - - 71.9 181.7OTHER 27 4.0 3.5 3.6 7.2 28.5 26.9 53.2 57.7 69.5 108.9 366.5

TAXES ON INTER. TRADE 28 246.7 254.2 341.5 704.4 944.0 765.2 1.206.4 1,398.5 2,322.1 1,853.4 2.640.2IMPORT DUTIES 29 230.7 241.0 329.4 687.1 927.9 746.6 1,156.1 1,275.3 2,196.3 1.816.1 2,550.3CUSTOMS DUTY 30 177.9 189.7 255.0 572.8 774.6 565.9 922.4 1,039.1 1.662.0 1,333.0 1,719.1ADMIN/STAT TAX . 31 52.8 S1.3 74.4 114.3 153.3 180.9 233.7 236.2 536.3 483.1 831.7EXPORT DUTIES 32 16.0 13.2 12.1 17.3 16.1 18.4 50.3 123.2 123.8 37.3 89.4

STAMP TAXES 33 40.8 43.8 51.0 103.3 148.5 126.6 195.0 186.8 308.5 227.9 330.1NONTAX REVENUE 3 83.7 94.3 181.4 191.4 148.9 179.3 183.3 109.7 611.0 793.3 637.6muumuua= fhsfl.na asalf Os....sawaso .a.s.a= n.a.s- aOssam,. swan.... saussa.. un----.OPERATING SURPLUS 117 - 14.8 - 21.t 19.5 24.3 42.1 9.4 94.8 69.8 141.6PROPERTY INCOME FROM: 35 52.6 54.8 91.6 74.4 1O7.0 131.5 67.3 28.3 10.4 30.2 148.1PUBLIC ENTERP. 36 47.9 52.5 80.4 71.7 97.2 123.1 62.0 26.0 0.7 - 141.7SHARE OF PROFITS 38 43.3 51.3 72.7 66.2 90.7 118.2 53.0 26.0 0.7 - 141.7SHARE OF DEPR. 4/ 39 4.6 1.2 7.7 5.5 6.5 4.9 9.0 - - - -OTHER 5/ 40 4.7 2.3 11.2 2.7 9.8 8.4 5.3 2.3 9.7 30.2 6.4

- PAGE 2

TABLE 5.2SOMALIA: CENTRAL GOVERNMENT REVENUE. 1975-85

(MILLIONS OF SONALI SHILLINGS)

…--------------------------------------------------_------------__-----------__-------------------------------------------__-----_--

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985…----------------------------------------------------------- _------ __-------____--_-__--------------------------------------------. -

NON-TAX REVENUE (CONT.)

ADMIN. FEES & CHARGES 6/ 41 23.2 16.2 39.5 24.1 10.5 10.0 47.2 13.7 2¶.0 1b.6 37.1

FINES AND FORFEITS 42 1.7 3.0 2.9 3.5 5.4 7.2 26.7 49.4 11 .5 92.2 75.3

ARREARS/PUB ENTERP. 175 - - - - - - - - 35 .0 352.5 209.6

OTHER 7/ 43 6.2 5.5 47.4 68.3 6.5 6.3 - 8.9 7.3 210.5 25.7

---------------------------------------------------------------------- ________________-------------------------------------

I/THIS IS AN ADDITIONAL INCOME TAX ON THE EARNINGS OF NONGOVERNMENT WORKERS.2/ GROSS P.T.T RECEIPTS LESS THE ORDINARY EXPENDITURE OF THE MINISTRY OF POST

AND TELECOMMUNICATIONS.3/ THE 'TURNOVER TAX- IS. IN FACT, NOT LEVIED ON TURNOVER. IT IS LEVIED AT

RATES DETERMINEO BY THE MINISTER OF FINANCE ON SOME PUBLIC ENTERPRISESTHAT REPORT NET PROFITS.

41 THE SHARE OF DEPRECIATION IS TREATED AS DOMESTIC CAPITAL TRANSFERS 1N THE

CENTRAL GOVT. BUDGET CLASSIFICATION. THESE TRANSFERS ARE REQUIRED BY LAW.

5/ INCLUDING MINING EXPLORATION, FISHERIES, AND OTHER CONCESSION LICENSES.

6/ INCLUDES HARBOR & WAREHOUSE FEES. SCHOOL FEES, AIRPORT TAX, PUBLICATION ANDNOTARY RECEIPTS. AND REGISTRATION FEES ON SHIPS.

7/ INCLUDING CAPITAL TRANSFERS FROM DOMESTIC SOURCES.SOURCES: MINISTRY OF FINANCE, IMF. & CENTRAL BANK OF SOMALIA.

TABLE SOM/5A/2

PAGE 1TABLE 5.3

SOMALIA:FUNCTIONAL CLASSIFICATION OF CENTRAL GOVERNNENTORDINARY EXPENDITURE. 1975-85(MILLIONS OF SONALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1 83 1984 1985

TOTAL 7 559.3 649.3 801.8 1,361.5 1.572.9 1.670.0 2,795.2 4.164.9 5,470.1 5,552.4 6,973.0

GENERAL PUBLIC SERVICES 44 192.4 205.9 263.7 465.5 588.5 582.5 1,382.2 2.634.9 3,199.9 2.726.8 4,121.2

PRFSIOENCY 45 19.9 20.1 21.6 32.0 34.3 31.1 34.7 38.9 26;6 34.5 39.4JUSTICE AND RELIGION 1/ 46 25 0 26.7 30.6 43.9 45.3 52.5 91.6 101.3 146.9 141.2 158.4INTERIOR AND POLICE 2/ 47 57.9 60.7 69.3 127.8 1tO.7 124.4 177.4 144.0 176.0 223.6 307.8FOREIGN AFFAIRS 48 23.3 27.6 40.3 45.3 51.9 50.0 59.6 136.6 178.8 219.9 427.2FINANCE 3/ 49 66.3 70.8 101.9 213.6 342.6 320.7 1.015.2 2,207.2 2,666.1 2,102.4 3.180.3PLANNING 4/ sO - - - 2.9 3.7 3.8 3.7 6.9 5.5 5.2 8.1

OTHER PUBLIC SERVICES 118 145.2 165.4 199.7 512.5 552.3 601.2 850.4 852.7 1,367.5 1,876.9 1.864.t

DEFENSE 51 145.2 165.4 199.7 501.9 533.0 588.4 823.6 825.9 1,300.0 1.785.9 1.750.9PEOPLE*S ASSEMBLY 119 - - - - - - 7.0 7.0 10.1 10.6 12.1NATIONAL MILITIA 120 - - - 10.6 19.3 12.8 19.8 19.8 24.8 44.9 55.0 1REVOLUTIONARY PARTY 200 - - - - - - - - 32.6 35.6 46.1 %0

SOCIAL SERVICES 52 127.2 160.3 198.6 233.8 261.3 283.9 359.4 426.3 516.9 545.3 555.8 1

EOUCATION 53 56.7 77.7 97.0 115.0 131.5 143.2 184.5 207.7 251.2 261.0 245.9HIGHER EDUCATION 54 13.6 19.1 23.8 31.7 35.7 37.9 40.4 46.6 62.8 66.3 68.5HfEALTH 55 41.3 45.6 57.8 63.8 62.2 74.5 98.4 110.0 128.7 138.4 153.9INFORMATION 56 12.8 14.3 16.1 17.3 20.2 19.9 2S.8 40.8 48.5 47.9 56.1LABOR 5/ 57 2.8 3.6 2.6 2.5 7.7 3.3 4.7 13.5 17.3 22.7 21.3SPORTS 58 - - 1.3 3.5 4.0 5.1 5.6 7.7 8.4 9.0 10.1

ECONOMIC SERVICES 59 94.5 117.7 139.8 149.7 170.8 202.4 203.2 251.0 385.8 403.4 431.9

AGRICULTURE 60 24.6 29.4 24.4 26.9 27.2 27.9 31.1 52.4 91.7 96.2 56.3LIVESTOCK 61 15.2 17.0 19.8 19.8 22.2 24.6 32.3 35.3 52.3 56.4 74.8FISHERIES 6/ 62 2.2 4.0 3.4 3.0 6.4 12.0 3.9 5.1 29.7 28.2 30.0MINERAL AND WATER RESOURC 63 0.6 9.2 6.6 7.9 16.8 39.2 17.2 23.6 50.1 53.4 75.4INDUSTRY 64 2.2 3.9 0.8 1.2 1.7 1.3 2.5 3.2 5.4 7.1 7.0COMMERCE 65 2.7 3.1 3.3 3.2 4.8 2.5 3.2 3.3 3.4 4.4 5.8PUBLIC WORKS 66 17.6 21.0 24.2 22.8 21.0 23.0 26.1 26.1 30.1 38.8 47.6IRANSPORTATION 67 28.3 30.1 34.4 39.8 44.8 40.0 53.9 53.9 61.9 53.1 55.9

PACE 2TABLE 5.3

SOMALIA:FUNCTIONAL CLASSIFICATION OF CENTRAL GOVERNMENTORDINARY EXPENDITURE. 1975-85(MILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

ECONOMIC SERVICES (CONT.)

POST 6 TELECOMM. 7/ 68 - 19.5 21.3 23.6 25.1 28.7 41.0 49.3 54.1 65.7TOURISM 8/ 69 1.1 - - - - 4.2 1.4 1.8 3.7 3.8 4.3MARINE TRANSPORT 70 - - 3.4 3.8 2.3 2.6 2.9 5.3 5.4 4.6 5.6JUBA VALLEY 204 - - - - - - - 2.8 3.3 3.5

------------------------------------------------------------------------- __--__-------------------_------------___-----_------------

1/ PRIOR TO 1982. MINISTRY OF JUSTICE AND RELIGION INCLUDED CUSTODIALCORPS AND YOUTH CENTRES.

2/ IN 1977 *POLICEO WAS TRANSFERRED TO THE *PRESIDENCY* AND *INTERIOR' WASCHANGED TO *LOCAL GOVERNMENTS AND RURAL DEVELOPMENT.0

3/ DATA ARE AOJUSTED TO EXCLUDE AMORTIZATION PAYMENTS: THE REMAINDER CONSISTSMAINLY OF PROVISION FOR SUBSIDIES AND CONTINGENCIES.

4/ FROM 1978. THE 'STATE PLANNING COMMISSION.- WHICH HAD BEEN INCLUDED IN THE'PRESIDENCY" DURING 1975-77 WAS PROVIDED A SEPARATE BUDGET.

5/ IN 1977 THE MINISTRY OF LABOR AND SPORTS BECAME TWO SEPARATE MINISTRIES.6/ UNTIL 1977 *FISHERIES' INCLUDED *NARINE TRANSPORT' ALSO.7/ OPERATING DEFICITS OF THE POSTS AND TELECOMM.; OPERATING SURPLUSES. DEFINED

AS GROSS RECEIPTS LESS ORDINARY EXPENDITURE. ARE SH1OWN IN TABLE 5.2 UNDEROPERATING SURPLUSES OF DEPARTMENTAL ENTERPRISES.

8/ THE MINISTRY OF TOURISM. WHICH WAS ABOLISHED IN 1976. WAS RE-ESTABLISHEDIN 1978.

SOURCE: MINISTRY OF FINANC. INF. 6 CENTRAL SANK OF SOMALIA.

TABLE SOM/5A/3

PAGE 1TABLE 5.4

SOMALIA: CENTRAL GOVERNMENT WAGE BILL 1/. 197S-85(MILLIONS OF SOMALI SHILLINGS)

ITEM 1975 1976 19?7 1978 1979 1980 1981 1982 1953 1964 19B5…------------------------------_-----------------------------------__-------___-----------------------------------------------------

TOTAL 2/ 71 149.5 172.8 206.9 311.5 311.6 384.5 436.5 464.2 573.6 646.3 683.8

GENERAL PUBLIC SERVICES 72 60.2 63.2 70.4 114.2 117.7 124.6 164.5 166.5 220.4 256.2 290.9

PRESIDENCY 73 4.6 5.3 6.3 10.6 4.2 4.6 5.6 4.0 6.9 6.9 6.4JUSTICE AND RELIGIOUS 3/ 74 12.7 14.3 11.3 25.5 28.4 32.6 41.2 42.5 46.3 47.6 S9.0INTERIOR AND POLICE 75 38.1 37.6 46.9 .71.2 77.0 78.1 104.3 104.3 125.4 147.7 154.2FOREIGN AFFAIRS 76 1.6 1.7 2.0 2.2 2.2 3.2 3.3 3.7 4.1 4.4 6.1FINANCE 77 3.0 4.3 3.4 3.6 4.7 4.7 6.7 8.2 16.3 27.6 38.6PLANNING/PEOPLE'S ASSEN. 78 - - - 1.1 1.2 1.3 1.5 2.1 2.2 2.4 2.5REV. SOCIALIST PARTY 210 - - - - - - 1.9 1.7 19.2 21.4 21.9

SOCIAL SERVICES 79 54.9 70.6 96.1 123.0 137.4 171.2 191.8 215.8 256.8 272.5 264.7

EDUCATION 80 33.0 48.0 70.1 86.0 98.6 122.0 135.5 156.5 185.6 195.1 186.2HtGHER EDUCATION 61 1.2 0.9 1.1 1.2 1.1 0.8 1.0 1.1 1.3 1.8 1.SHEALTH 82 17.2 17.4 20.3 28.6 30.4 37.3 46.1 47.9 58.0 63.4 63.6INFORMATION 83 2.8 3.1 3.0 3.6 4.1 4.3 4.6 5.0 6.0 5.8 6.9LABOR/SPORTS 84 0.7 1.2 1.6 3.6 3.2 6.8 4.6 5.3 5.9 6.7 6.S O

ECONONIC SERVICES 85 34.4 39.0 40.4 74.3 56.5 79.6 70.2 71.1 66.? 102.4 101.9

AGRICULTURE 86 3.9 5.0 5.0 10.2 7.4 14.2 6.6 7.1 9.3 11.5 11.1LIVESTOCK 87 6.5 7.7 6.8 t2.7 10.0 15.9 12.9 13.4 15.8 17.9 19.1FISHERIES/MARINE TRANSPOR 88 1.0 1.7 2;1 6.1 3.1 4.3 3.3 3.5 7.1 S.9 4.9MINERAL AND WATER RESOURC 89 0.2 0.3 0.3 3.1 0.7 3.6 2.0 1.6 0.9 2.5 2.5INDUSTRY 90 0.4 0.5 0.6 11.0 0.9 1.2 1.3 1.5 1.8 2.3 2.2COMMERCE 91 0.7 0.6 0.6 0.7 0.7 0.8 1.0 0.9 1.0 1.2 1.2PUBLIC WORKS 92 7.8 9.3 8.9 11.2 12.0 11.4 15.2 14.6 16.5 t1.0 17.2TRANSPORTATION 93 9.5 9.1 10.1 12.5 12.9 1S.7 14.4 14.8 16.3 19.6 18.3POST 6 TELECOMM. 94 4.1 4.8 6.0 6.8 8.2 10.3 11.2 11.2 16.4 21.5 22.7TOURISM 95 0.3 - - - 0.6 0.8 0.9 1.0 1.2 1.2 1.4JUBA VALLEY 212 - - - - - - - - 0.7 0.8 0.8INTERIOR 219 - - - - - 1.4 1.4 1.3 1.7 _ -

TOTAL PENSION 218 - - - - - 9.2 1O.0 10.8 12.7 t2.9 26.3

…------------------------------------------------------------------__--------__-----------------------------------------------------I/INCLUDES SALARIES AND OTHER PERSONAL ENDOWMENTS AND ALLOWANCES.2/ THIS TOTAL DOES NOT INCLUDE THE WAGE BILL OF THE MINISTRY OF DEFENCE.

SINCE 1974, DETAtLS OF THE ORDINARY EXPEND. OF THE MINISTRY OFDEFENCE HAVE NOT BEEN PUBLISHED.

3/ INCbIUDES CUSTODIAL CORPS AND YOUTH REVOLUTIONARY CENTRE.SOURCE: MINISTRY OF FINANCE. IMF 6 STAFF ESTIMATES.

PAGE tTABLE 5.5

SOMALIA: FUNCTIONAL CLASSIFICATION OF CENTRAL GOVERNMENTBUDGETARY DEVELOPMENT EXPENDITURE. t975-85 1/

(MILLIONS OF SOMALI SHILLINGS)

…__ -- ___-- ________________________________________________________________________________________________________________________

ITEM 1975 1976 1277 1978 1979 1980 1981 1982 1983 1984 1985

TOTAL 96 113.3 165.5 211.4 186.9 224.2 t62.0 285.8 347.6 498.1 661.5 911.5

GENERAL PUBLIC SERVICES 97 1.2 1.0 1.1 1.5 1.5 4.1 8.4 2.7 9.5 20.9 138.2…_______ -------- -------- -------- -------- -------- -------- -------- -------- -------- --------

PRESIDENCY 98 1.2 1.0 1.1 1.5 1.5 4.1 - - - - -MINISTRY OF PLANNING 215 - - - - - - 3.0 2.7 2.7 1.3 35.6LOCAL GOVT/RURAL AFFAIRS 216 - - - - - - 5.4 - 6.8 t9.6 51.6FINANCE 220 - - - - - - - - 51.0

SOCIAL SEVICES 99 16.7 22.7 24.3 26.8 24.5 11.0 36.4 51.7 56.8 113.1 226.1…_______ -------- -------- -------- -------- -------- -------- -------- -------- -------- ------ --

EDUCATION 100 13.4 18.0 17.1 17.4 17.8 7.9 33.3 47.8 49.2 72.8 97.3HIGHER EDUCATION 1O0 0.5 1.4 1.7 2.5 1.8 1.5 0.6 0.7 1.3 3.6 62.0HEALTH 102 - 1.2 2.6 2.2 1.0 - - - - 12.1 27.3 'INFORMATION 103 2.3 - 0.7 1.3 - - 2.0 19.9 20.0LABOR 104 - - 1.5 3.0 3.9 1.6 2.5 3.2 4.3 4.7 19.5SPORTS 105 0.5 2.1 0.7 0.4 - - - - - - -

ECONOMIC SERVICES 106 95.4 141.8 186.0 158.6 198.2 146.9 241.0 293.2 431.8 527.5 547.2… ______ -------- -------- -------- -------- -------- -------- -------- -------- --------

AGRICLTURE 107 25.4 30.2 49.7 31.7 45.5 50.0 76.0 96.2 197.0 203.6 178.6LIVESTOCK 108 16.1 22.6 23.1 24.6 37.7 30.i 55.5 58.8 67.8 98.4 163.3FISHERIES 109 6.3 3.8 1.2 9.3 28.4 9.2 7.0 12.9 t6.6 27.1 2t.4MARINE TRANSPORT 110 - - 10.5 2.2 0.8 0.9 0.6 0.4 2.7 1.1 2.9MINERAL S WATER RESOURCES itt 20.3 35.9 24.4 19.9 19.4 14.4 41.3 64.0 70.0 93.9 69.2INDUSTRY 112 22.4 26.9 50.1 36.8 41.2 30.9 27.4 22.9 23.6 15.6 -PUBLIC WORKS 113 5.9 11.4 27.0 34.1 21.5 11.4 20.7 25.2 14.5 37.4 71.4TRANSPORTATION 114 - 11.0 - - - - - - - -POST & TELECOMMUNICATIONS 115 - - - - - - 12.5 12.8 36.6 43.5 31.5TOURISM 116 - - - - 3.7 - - - - - -JUBA VALLEY 217 - - - - - - 3.0 6.9 8.9

1/ INCLUDES ONLY DEVELOPMENT EXPENDITURE FINANCED FROM DOMESTIC RESOURCES.SOURCE: MINISTRY OF FINANCE.

TABLE SOM/SA/5

PAGE 1

TABLE 6.1SOMALIA: MONETARY SURVEY, t976-86

(MILLIONS OF SO.SHILLINGS; END OF PERIOD)

ITEM 1976 1977 1978 1979 1980 t981 1982 1983 1984 1985 1986

FOREIGN ASSETS (NET) 1/ 1 515.2 802.2 936.6 316.4 144.8 71.6 -640.8 -2.380.4 -4.645.4 -5.867.7 -9.532.1

CENTRAL BANK OF SOMALIA 2 380.6 558.1 609.3 79.5 -194.6 -804.0 -1.947.3 -3.134.2 -4.989.7 -9.649.0-13.871.6

NATIONAL COMM. BANK 3 134.6 244.1 327.3 236.9 339.4 875.6 1,306.5 753.8 344.3 3,781.3 4,339.5

DOMESTIC CREDIT . 4 1.110.8 t,182.9 1,715.7 2.957.t 3.879.5 4.545.7 5.023.8 5.260.8 9.616 2 11.347.0 12.898.1

CLAIMS ON GOVERNMENT (NET) 5 124.4 -97.8 311.1 1.231.4 1.902.4 2.249.6 2,100.0 t.805.0 4,378.2 5.252.0 6.867.5

CLAIMS ON PUBLIC ENTITIES 6 640.5 905.5 1,002.5 1,278.6 1.551.1 1,721.5 1.300.0 1.163.0 1.511.1 2.071.2 *.966.2

CLAIMS ON PRIVATE SECTOR 7 345.9 375.2 402.1 447.1 426.1 574.6 1.623.8 2.292.8 3.726.9 4.023.9 4,064.4

MONEY 8 994.9 t,325.1 1.728.0 2.335.2 2.783.2 3.619.3 3,911.1 4.156.5 5.077.6 9.117.3 9.973.3

CURRENCY IN CIRCULATION 9 475.0 718.5 1,030.0 1.356.3 1,507.9 1.891.0 1.455.7 1.355.5 1.899.8 3.787.5 4,176.6

DEMAND DEPOSITS 10 519.9 606.6 698.0 978.9 t.275.3 1.728.3 2.455.4 2.801.0 3.177.8 5.32°.8 5.796.7

OUASI-MONEY 11 205.1 219.5 318.8 477.7 597.9 747.1 1.083.5 1.191.6 1.600.2 2.785.3 3,113.3

OTMER ITEMS (NET) 1OS 426.0 440.5 605.5 460.6 643.2 250.9 -611.6 -2.467.7 -1.707.0 -6.423.3 -9.720.6

VALUATION ADJUSIMENT 106 - - - - 160.7 161.9 -514.1 -1,551.6 -1,447.0 -6,124.1-t0,120.4 0

OTHER ITEMS (NET) 107 426.0 440.5 605.5 460.6 482.5 89.0 -97.5 -916.1 -260.0 -299.2 399.8 t'

1/ INCLUDES VALUATION ADJUSTMENTS.SOURCE: IMF, INTERNATIONAL FINANCIAL STATISTICS. AND DATA PROVIDED BY

SOMALI OFFICIALS.

IABLE SOM/6M/1

PAGE ITABLE 6.2

SOMALIA: SUMMARY ACCOUNTS OF THE CENTRAL BANK OF SOMALIA, 1975-86(MILLIONS OF SOMALI SHILLINGS ;END OF PERIOD)

._______________________________________________._____________________________.____________________________________________________ITEM 1975 1976 1977 1978 1979 1980 1981 1982 198? 1984 1985…---------------_---- --------------------------------------------- __-_------___-------------------------------------------------_--

FOREIGN ASSETS 20 445.2 537.4 755.0 818.7 321.4 158.4 529.4 216.8 277.7 165.0 346.6CLAIMS ON GOVERNMENT 23 33.3 262.0 377.2 883.6 1.658.8 2.439.7 2.959.9 3,995.4 6,055.0 6,334.2 7,315.7CLAIMS ON PUBLIC ENTITIES 24 107.1 105.4 162.1 182.6 174.4 240.1 220.6 192.2 201.0 647.5 1,446.2CLAIMS ON COMMERCIAL BANKS 25 548.8 212.5 412.3 367.3 299.2 412.6 825.1 1,424.0 1,897.5 2,424.4 2.522.0UNCLASSIFIED ASSETS 1/ 28 40.2 54.9 100.8 147.3 175.8 185.4 254.7 599.7 1,839.7 2.110.2 7,255.0

TOTAL ASSETS/LIABILITIES 27 1.t74.6 t,172.2 1.807.4 2.399.4 2.629.6 3,436.2 4,789.7 6,428.1 10,270.9 11.681.3 18,885.5…_______ -------- -------- -------- -------- -------- -------- -------- -------- -------- --------

CURRENCY 28 421.0 453.2 666.6 962.1 1,247.8 1,674.5 2,162.5 1,656.2 1,708.5 2,329.2 4.206.9CIRCULAR CHECKS 29 11.8 10.8 18.5 23.1 13.9 27.9 40.0 65.8 89.0 142.0 156.0DEMAND DEPOSITS 30 45.1 106.7 86.4 99.7 68.4 69.7 53.6 171.4 229.8 398.7 80.5

PUBLIC ENTERPRISES 31 43.4 100.2 75.8 81.0 59.1 52.3 45.3 158.0 212.0 392.0 66.0SPECIALIZED FIN. INST. 32 1.7 6.5 10.6 18.7 9.3 17.4 8.3 t3.4 17.8 6.7 14.5

COMMERCIAL BANKS' DEPOSITS 33 51.3 62.1 71.7 96.8 138.8 160.0 200.3 276.1 267.0 590.7 639.5GOVERNMENT DEPOSITS 34 271.5 137.6 475.1 572.4 427.5 537.3 710.3 1,895.3 4,250.0 1,956.1 1,893.9FOREIGN LIABILITIES 35 168.2 156.9 196.9 209.4 243.7 352.6 1,333.4 2,164.1 3,411.9 5,154.7 9,995.6 lALLOCATION OF SORS 36 51.3 47.6 48.0 50.7 71.8 92.5 103.3 96.9 273.0 356.0 558.0 _CAPITA'. AND RESERVES 37 34.1 48.2 62.7 77.5 83.0 113.9 354.5 311.2 375.5 482.7 751.9 0UNCLASSIFIED LIABILITIES 2/ 38 120.3 149.1 181.5 307.7 334.7 407.8 -16S.2 -208.9 -333.8 271.2 603.2 t

…_ __ __,,_______________._______________________._________________________________________________________________________________

SOURCE: CENTRAL BANK OF SOMALIA, ANNUAL REPORTS. IMF, AND DATA PROVIDEDBY THE SOMALI AUTHORITIES.i/ MAINLY CAPITAL PARTICIPATION AND THE REVALUATION ACCOUNT.2/ INCLUDES SMALL AMOUNTS OF TIME AND SAVINGS DEPOSITS

OF PUBLIC ENTERPRISES.

TABLE SOM/6M/2

PAGE 1TABLE 6.3

SOMALIA: SUMMARY ACCOUNTS OF THE N4ATIONAL COMMERCIAL BANK OF SOK>LIA. 1975-86(MILLIONS OF SOMALI SHILLINGS; END OF PERIOD)

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

CASH 40 31.5 39.4 44.1 79.0 95.2 166.6 271.5 200.5 353.0 429.4 419.4

DEPOSITS WITH CENTRAL BANK 41 51.3 62.2 74.5 96.9 139.0 160.1 200.3 264.1 306.0 618.5 739.4

FOREIGN ASSETS 42. 230.7 140.3 249.5 376.8 240.4 339.4 930:4 1,428.0 906.6 599.7 4.436.1

CLAIMS ON PRIV S PUB SEC 43 934.6 880.9 1,116.6 1,222.1 1,551.3 1,737.0 2.075.5 2.371.7 3.254.6 4.590.5 4,648.9

UNCLASSIFIED ASSETS 44 48.3 34.1 92.8 61.1 179.2 159.7 859.2 1.24.2 1.998.7 1.397.3 2.368.0

TOTAL ASSETS/LIABILITIES 45 1.296.4 1,156.9 1,579.5 1,835.9 2.205.1 2,562.8 4,336.9 5,388.5 6.819.1 7,635.4 12,613.8

CIRCULAR CHECKS 46 51.0 50.3 77.5 123.8 189.9 236.9 433.9 789.5 911.6 629.6 481.1

DEMAND DEP. OF PRIV.& PUB. 47 328.9 414.5 522.0 600.3 913.3 944.1 1.204.8 1,510.2 1,725.5 2,012.1 4,359.2

TIME 8 SAVINGS DEPOSITS 48 178.9 203.7 217.6 316.9 474.8 594.6 743.2 1,078.1 1,185.7 1,595.4 2,778.0

FOREIGN LIABILITIES 49 3.4 5.7 5.1 49.5 1.7 - 54.8 121.5 152.8 255.5 656.8

LIABILITES TO CENTRAL BANK 50 497.1 230.3 418.1 382.7 371.3 435.6 810.9 1.465.7 1,825.0 2,361.2 2,587.0

CAPITAL AND RESERVES 51 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5 14.5

UNCLASSIFIED LIABILITIES 52 222.6 237.9 324.7 348.2 239.6 337.1 1,074.8 409.0 1,004.0 767.1 1,737.2

-_____--________--_______.._____________________________________________________________________________________.___________________SOURCE: CENTRAL BANK OF SOMALIA. ANNUAL REPORTS. IMF, AND DATA PROVIDEDBY THE SOMALI AUTHORITIES.

TABLE SOM/6M/3

PAGE 1TABLE 6.4

SOMALIA: SUMMARY ACCOUNTS OF THE SOMALI DEVELOPMENT BANK. 1975-84(MILLIONS OF SOMALI SHILLINGS)

-----.-------------------------------------- _------------------___-----------__--------------------------------------------

ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

CASH AND DEPOSITS VITH BANKS 60 1.4 15.0 24.6 37.0 21.2 27.6 16.3 11.3 58.4 21.7LOANS 61 116.4 107.9 124.6 125.8 154.8 179.2 227.6 230.3 261.1 369.2INVESTMENTS 62 13.0 17.1 17.1 25.7 26.0 34.0 13.0 50.5 39.5 28.9OTtER ASSETS 63 9.5 24.3 26.4 47.3 51.8 66.2 20.1 30.5 31.6 12.2

TOTAL ASSETS/LIABILITIES 64 140.3 164.3 192.7 235.8 253.8 307.0 277.6 322.6 390.6 432.0

FOREIGN LIABILITIES 65 6.0 4.8 10.2 13.5 12.0 20.1 35.4 44.4 46.8 71.2OTHER LIABILITIES 66 32.8 43.4 53.6 58.1 56.9 80.0 16.8 42.8 96.7 87.3CAPITAL AND RESERVES 67 101.5 t16.1 128.9 164.2 184.9 206.9 225.4 235.4 247.1 273.5

SOURCE: SOMALI DEVELOPMENT BANK

TABLE SOM/6M/4

0oJ

- 106 -

Table 6.5

Somalia: Distribution of Ranking System Creditby Economtc Activity, December 1980-September 1985 I/

Agri- Industryculture and crafts Trade Other Total 2/

(In millions of Somali shitlings; end of period)

1980 December 307.4 497.0 1,047.7 125.0 1,977.11981 December 502.0 587.4 1,098.6 108.0 2,296.01982 December 677.3 719.0 1,428.0 99.5 2,923.81983 December 639.8 470.8 2,214.9 130.3 3,455.8

1984 March 1,295.5 698.2 1,340.8 376.1 3,710.6June 480.9 325.4 3,020.7 427.9 4,254.9September 742.8 554.1 2,753.6 434.8 4,485.3December 1,053.3 488.1 3,119.2 577.4 5,238.0

1985 March 777.2 244.1 3,652.1 579.0 5,252.4June 685.5 563.7 3,528.4 591.9 5,369.5September 886.5 154.8 3,831.5 603.7 5,476.5

(In percent; end of period)

1980 December 15.6 25.1 53.0 6.3 100.01981 December 21.9 25.6 47.8 4.7 100.01982 December 23.2 24.6 48.8 3.4 100.01983 December 18.5 13.6 64.1 3.8 100.0

1984 March 34.9 18.8 36.1 10.1 100.0June 11.3 7.6 71.0 10.1 100.0September 16.6 12.4 61.4 9.7 100.0December 20.1 9.3 59.6 11.0 100.0

1985 March 14.8 4.6 69.5 11.1 100.0June 12.8 10.5 65.7 11.0 100.0September 16.2 2.8 70.0 11.0 100.0

Sources: Central Bank of Somalia, Bulletin, various years; and dataprovided by the Somali authorities.

I/ Includes Central 8ank and Commercial and Savings Bank credit tonongovernment sector only.2/ Outstanding total differs slightly from the monetiry survey because

this sertes is not revised by the monetary authorities.

Table 6.6

Somalia: Number and Amount of Loans Approved bythe Somali Development Bank, 1981-85

(In Millions of Somali Shillings; end of Period)

1981 1982 1983 1984 1985Number AMount Number Amount Number Amount Number Amount Number amount

Agriculture 139 10.6 116 8.6 83 16.8 142 54.2 158 234.3

Livestock 13 1.2 2 0.3 4 1.8 9 12.0 4 5.0

Fisheries - -- 2 0.9 3 6.0 6 50.7

Industry 34 23.2 19 35.7 33 45.7 26 110.5 36 308.9 O

Transport 6 3.9 4 1.3 5 7.9 - 2 36.0

Constructionand housing -- -- -- -- - -- 3 21.0 I/

T.ssrIsm 2 6.0 -- -- -- t 0.5 1 1.5

Otimer 2 0.1 17 2.8 2 8.0 5 9.3 4 3.9

Totasl 196 45.0 158 48.7 129 81.1 186 19.5 214 661.3

I/ Data for 1985 includes mining, which was previously included in otlher.

Source: Somali Development Bank.

Table 6.7

Somalia: Interest Rate Structure. June 1981-February 1986

(in Percent)

Interest rates oan credits Interest rates oe de2osttsFrro From From From From From r.om From From

6/30/81 6/30/62 111/85 2/1/66 6130/01 6/30182 1/1/63 111/3S 211186

CesazrJl lljak ftv*te sectortthItelal dtscount rate 6.0 8.0 12.0 12.0 Ordinary savings 6.0 6.0 12.0 12.0

v.&Jeranrent credits 6.0 8.0 12.0 12.0 Time savings 3 months 6.S B.5 14.0 14.0Time savings 6 months 7.0 9.0 15.0 15.0

C.jsercalj bank Time savings 12 months J.5 9.5 16.0 16.0Credit to cooperatives ) ) IS.0 15.0 Tie "avings 24 sonths S.5 10.5 17.0 17.0a.1. sAll-beale farmers ) ) Til_ saviags over 24 months 9.0 11.0 12.0 22.0

Cr.dtt to public ) ) 19.0 * 19.0ei,terprlsds ) )

Credit t) export ) 10.0 ) 12.0 IS.0 15.0

Credit tu nationjl ) ) oprivate enterprises ) ) 19.0 20.00

Credit to foreignenterprises 12.5 14.5 20.0 21.0

Developm;eot LankMedIuftere (2-6 year)

loans to *igriculttcarand handicratt 10.0 10.0 14.0 14.0

)-4dlu.-ters (2-6 year)Iu4nb to tndustryagd mining 11.0 11.0 1S.0 15.0 externdl accounts

4vJlum-term (2-6 year) Ordinary savings 7.0Io.sna to others 12.0 12.0 16.0 16.0 Ti1e savings 3 months 8.0

L..tn.-tcra (7-20 year) Time savings 6 months 6.51). n s to a,triculture Time savings 12 manths 9.0.Aod h.andicraft 11.0 l.0 15.0 15.0 Time savtngs 24 months or longer 10.5

lnung-tera (7-20 year)W.sis to tndustrymad mintig 12.0 12.0 16.0 16.0

L...le-aerm (7-20 year)14.4ub tu4 others 14.0 14.0 17.0 17.0

S.,. .. , Oil j prt,vtideJ by the Somali authuorit es.

- 109 -

Table 6.8

Somalia: Exchange Rates, 1983-86

(Somali shillings per U.S. dollar)

Commerctal FreeOfficial bank market arketmarket 1/ (average) (average)

1983

January 1-8 15.2057 --

January 9-28 14.8641 -- --January 29-July 29 15.2606 July 30-August 30 15.6305 - --

August 31-October 22 15.7567 -- --

October 23-December 31 17.5556 -

1984

January 1-September 14 17.38 -- --

September 15-December 1 26.00 - --

1985 2/

January 36.00 78.0452 88.98February 36.50 81.1667 89.44March 37.00 81.9841 91.39April 37.50 83.6133 92.59May 37.50 83.6133 93.80June 40.60 84.4250 97.82July 40.60 84.4250 101.54August 40.60 84.4250 102.09September 40.60 84.4250 100.70October 40.60 84.4250 107.15November 40.60 84.4250 110.49December 42.50 84.4250 114.69

1986 2/

January 54.50 84.4250 114.76February 54.50 84.4250 122.90March 58.50 84.4250 138.63April 62.50 84.4250 148,13May 66.50 84.425o 152.89June 70.50 84.4250 153.95July 74.50 84.4250

1/ 'liddle rates._/ Beginning of period.

Source: I'F.

PAGE 1TABLE 7.t

SOMALIA: PRODUCTION OF AGRICULTURAL CROPS. 1975-85(THOUSAND METRIC TONS)

ITEM 1975 1976 1977 1978 1979 1980 1901 1982 1983 1984 1985

MAIZE 1 103.6 107.6 t11.3 1O7.7 108.2 110.5 157.3 150.0 235.0 270.1 382.0

RICE 2 4.- 5.4 8.4 12.1 t3.4 16.7 7.7 20.0 2.8 4.2 6.2

SORGILM 3 134.7 139.3 145.1 141.1 140.1 140.5 206.9 235.0 120.0 221.2 226.0

BEANS 4 9.4 9.3 10.2 10.1 8.2 9.3 2.5 5.9 20.8 31.6 39.0

TOTAL STAPLES 5 252.7 261.6 275.0 271.0 269.9 277.0 374.4 410.9 378.6 527.1 653.2

SESAME 6 37.3 38.8 40.6 40.0 40.6 38.4 27.t 57.0 59.5 46.0 100.0

GROUtONUTS 7 2.6 2.7 2.8 2.8 2.9 2.9 0.8 3.2 2.6 5.0 3.9

VEGETABLES 8 24.7 25.7 26.9 26.5 26.6 27.2 20.3 102.2 82.0 95.0 67.0

COTTON 9 3.0 3.1 3.3 3.2 3.3 3.3 1.6 3.3 4.0 4.0 2.9

SUGAR CANE 10 370.0 333.3 320.0 3t1.5 265.0 419.5 378.2 483.2 449.7 342.3 416.0I

SUGAR 11 30.6 33.2 30.0 24.0 21.4 29.1 26.8 34.1 30.8 30.5 39.5

BANANA 12 106.0 96.6 65.2 69.7 72.2 60.4 69.0 78.7 98.9 62.2 60.0

URCE: DATA PROVIDED BY MINISTRY OF AGRICULTURE AND CENTRAL BANK.

BLE SOM/7C/I

PAGE 1

TABLE 7.2SOMALIA: BANANAS-AREA. YIELDS AND EXPORTS

- -- - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - -- - - - - - - - - - - - -- - - - _ _- - _ _- - - - - - - - -- - - - - - - - -- - - - - - - -- -- - - - - - - - -- - - - - - - - - - - - - - -

ITEM 1975 1976 1977 1976 1979 1980 1981 1982 1983 1984 1985

CULTIVATED AREA (HA.) 15 8.342.0 7,422.0 7.1OO.0 6.831.0 6.000.0 4.600.0 3.600.0 4.300.0 4.400.0 4.500.0 5.100.0

PRODUCING AREA ( HA.)t/ 16 6,148.0 5,319.0 5,200.0 5,200.0 5,800.0 2.600.0 2.900.0 2.800.0 2.800.0 3,000.0 2.700.0

PRODUCTION (OOO'TONS) 17 106.0 96.6 65.2 69.7 72.2 60.4 59.0 78.7 98.9 62.2 60.0

VIELO (TON/HA.)2/ l8 17.2 18.2 12.5 13.7 12.5 23.2 20.3 28.1 35.3 20.7 22.2

EXPORTS (OO'TONS) 19 81.8 72.5 53.8 57.5 55.5 35.4 34.3 50.7 62.4 47.9 45.3

EXPORTSIN1LL SO.SH.;708)3/ 20 80.9 85.1 64.7 70.2 68.5 46.6 66.2 153.6 234.4 283.9 871.0

EXPORTS-L1NIT VAL(SO.SH/TON) 21 989.0 1.174.0 1.216.0 1,221.0 1.234.0 1.316.0 1,930.0 3.030.0 3.756.0 5.927.0 19.227.0

1/ PRODUCING AREA IS LESS THAN TOTAL AREA. AS REPLANTING IS REQUIRED I

EVERY 3-4 YEARS.2/ VTELDS EXPRESSED PER HECTARE OF PRODUCING AREA.

3/ DO NOT AGREE WITH BALANCE CF PAYMENTS FIGURES AND TRADE DATA IN

TABLES 3.1. 3 3. AND 3.5. *4ICH ARE BASED ON FOREIGN EXCHANGERECORD. AND FORIEGN TRADE RETURNS DATA.

DATA FOR 186 REFER TO THE %JANUARY-dUNE PERIOD.

SOURCE: NATIONAL BANANA BOARD, ANNUAL REPORT; CENTRAL SANK OF SONALIA.

ANNUAL REPORT: AND DATO PROVIDED BY THE SOMALI AUTHORITIES.

TABLE SOM/7C/?

PAGE 1TABLE 7.3

SOMALIA: PRODUCTION Of SUGARCANE AND SUGAR t975-85

ITEM 1975 1976 1977 - t978 1939 o980 198I 1982 1983 1934 1985

CULTIVATED AREA (000 HA.) 22 7.0 6.6 8.9 6.0 6.7 8.1 10.2 9.3 It.*- 7.3 tO.O-

HARVESTED AREA (000 HA.) 23 - - 3.6 3.5 3.0 -6.6 8.2 6.5 8.3 5.t 5.3

YIELDS (TON/HA.) 24 - - 88.9 69.0 87.1 63.6 48.1 56.6 54.2 sl.1 52.0

SUGARCANE HARVESTED(O00 TON 25 370.0 333.3 320.0 311.5 265.0 419.5 378.2 483.2 449.7 242.3 4t6.0

SUGAR PRODUCTION (000 TONS) 26 20 6 p3.2 30.0 24.0 21.1 29.1 26.5 34.1 20.8 10.S 39.6

EXTRACTION RATE IX) 27 8.3 10.2 9.0 7.7 6.1 6.9 7.0 - 7.0 6.3 S.1

I/ YIELDS EXPRESSED PER HECTARE OF HARVESTED AREA.SOURCE: CENTRAL RAWC OF SOMALIA. ANNUAL REPORTS.

TABLE SOM/7C/3

l

-113-

Table 7.4

Somalia: Producer Prices for Major Crops, 1978-86 1/

(In Somali shillings per quintal)

197 1979 1930 1981 1982 1983 1984 1985 1986

Nominal produeer price 56.0 56.0 66.0 170.0 185.0-215.0 2/ 245.0 475.0 900.0 1, 300.nRea1l price tndex 90.7 73.4 54.4 96.9 86.0-99.9 83.5 84.2 l1S.7 125.0

Nomieal producer price 75.0 75.0 120.0 180.0 160.0 360.0 650 0 1,500.0 3/ 1,500.0 3/"tes prtee tadex 90,7 73.4 73.8 76.6 62.5 91.6 66.0 144.1 107.7

Sorghum1el0*5"c producer price 75.0 75.0 120.0 160.0 160.0 220.0 4S0.0 1,300.0 It 1,300.0 3/'est prtce ladex 90.7 73.4 73.8 68.1 55.5 56.0 59.6 124.9 93.3

nice (unn1tled) 4/Nointal producer price 28S.0 285.0 265.0 320.0-280.0 32n.0-260.0 420.0 .. ...1RaI' prico iadex 90.7 73.4 46.1 35.8-31.3 29.2-2S.6 28.1 .. ...

CottonNominal preducer prtce 260.0 260.0 300.n 350.0 350.0 800.0 1,500.0 2,000.0 ..Real' price index 90.7 73.4 53.2 43.0 35.0 58.7 30.5 55.4

Soso"eoittnal producer petce 240.0 240.0 300.0 450.0 700.0 870.0 910.0 S.000.0'Real petce Ladex 90.7 73.4 57.7 59.8 75.9 69.2 37.7 150.1

Memorandum items

Consumr Prtce index 5/ 110.2 136.3 216.7 313.4 384.2 524.0 1,006.8 1,387.9 1.657.3 6/

Sourcest Date provided by SOtAWRUIT; th Agricultural fDevelopment Corporation; snd the Ministry of Agrteulture.

1/ fteflated by the consumer price iade:.Ti The Price range ase spectfted to differenttate for quality.Ti ThGese petces reflect the prev.iling market prices.T/ Utll 1980 the price for filled rtee was So. Sh. 350/quinatl and the prtce for unallted rice was So. Sh. 285/quintal. In

1911 the Covernment dtcoantinued purchases of willed rice. The prices for unmilled short- and long-gratn rtev were set at So.Sh. 320/quintat and So. Sh. 2 80/quintal, respettively. tn 1983 the prices for unmilled *hort- and long-grain rice were uniftedat So. Sb. 420/qutn:al. Subsequently, producer ptices for rice vere no longer set.

S/ Period average, 1977 * 100.T/ Projecton.

Table 7.5

Somalia: Domestic Purchases of Grain by the ADC and Producerand Consumer Prices, 1979/80-1986-87

(In thousands of metric tons and Somali shillings per metric ton)

Maize Sorghum (whtte)Amount Producer Consumer Amount Producer Consumer Total purchases

Period 1/ purchased price price purchased price prlce of grain

1979/80 8.6 750 1,160 52.3 750 1,160 60.9

1980/81 4.0 1,200 1,800 12.2 1,200 1,800 16.2

1981182 8.0 1,800 2,500 33.9 1,600 2,300 41.9

1982/83 2.2 1,800 3,250 8.0 1,600 2,650 10.2

1983/84 0.4 3,600 4,700 9.9 2,200 3,300 10.3

1984/85 0.7 6,500 8,100 0.4 4,500 6,100 1.1

1985/86 0.4 15,000 18,000 0.3 13,000 17,000 0.7

1986/87 ... 15,000 18,000 ... 13,000 17,000

Source: Data provided by the ADC.

1/ February-January.

PAGE 1TABLE 8.1

SOMALIA: SELECTED DATA ON PUBLIC AND PRIVATE SECTORMANUFACTURING INDUSTRIES ENGAGING 5 OR MORE PERSONS

(VALUES IN MILLIONS OF SOMALI SHILLINGS)-----------------------------------------------------------

___---_------------__---------------___-----_

ITEM 1975 1976 1977 1978 1979 1980 181 19j2

NUMBER OF ESTABLISHMENTS (NO.) 1 299.0 265.0 272.0 277.0 258.0 168.0 170.0 t771.0PUBLIC 2 46.0 47.0 48.0 53.0 47.0 39.0 49.0 4j.0PRIVATE 3 253.0 218.0 224.0 224.0 211.0 129.0 121.0 t34.0PUBLIC SHARE (%) 4 15.4 17.7 17.6 19.1 18.2 23.2 28.2 24.3

EMPLOYMENT (NO.) S t1,445.0 11,542.0 t2.324.0 12,482.0 12.863.0 10.800.0 13.300.0 13,400.0PUBLIC 6 7,401.0 8.265.0 9,S57.0 9.735.0 9.970.0 8,600.0 11,400.0 tt,300.0PRIVATE 7 4.044.0 3,277.0 2.767.0 2,747.0 2.893.0 2.200.0 1.900.0 2,1OO.0PUBLIC SHARE (X) 8 64.7 71.6 77.5 78.0 77.5 74.6 85.8 84.3

GROSS OUTPUT 9 405.1 489.8 574.5 536.4 882.2 844.3 964.5 1,869.0PUBLIC 10 3t2.9 396.2 481.6 414.2 712.5 674.2 721.3 t,563.0PRIVATE 1t 92.2 93.6 92.9 122.2 169.7 170.1 243.2 306.0PUBLIC SHARE (X) 12 77.2 80.9 83.8 77.2 80.8 76.2 74.8 83.6

VALUE ADDED 13 138.4 209.8 281.1 268.2 283.5 447.8 356.9 467.6PUBLIC 14 110.0 178.8 249.9 215.9 220.6 387.8 276.5 402.5PRIVATE 15 28.4 31.0 31.2 52.3 62.9 60.0 80.4 65.0PUBLIC SHARE (X) 16 79.5 85.2 88.9 80.5 77.8 86.6 75.6 84.5

WAGES/SALARIES 17 52.3 62.2 72.1 85.6 98.7 91.1 156.4 194.0PUBLIC to 42.4 52.5 64.3 73.8 85.6 77.8 140.3 172.0PRIVATE 19 9.9 9.7 7.8 11.8 13.1 13.3 16.1 22.0PUBLIC SHARE (%) 20 81.1 e4.4 89.2 86.2 86.7 85.4 89.7 88.7

GROSS FIXED CAPITAL FORMATION 2t 67.4 127.8 102.7 91.8 85.0 46.5 t17.3 345.2PUBLIC 22 63.6 126.7 97.1 87.9 65.7 37.9 101.1 290.2PRIVATE 23 3.8 1.1 5.6 3.9 19.3 8.6 16.2 55.0PUBLIC SHARE (%) 24 94.4 99.1 94.5 95.8 77.3 81.5 86.3 84.1

GROSS OUTPUT/EMPLOYEE(OOO) 25 3.5 4.2 4.7 4.3 6.9 8.1 7.2 13.9PUBLIC 26 4.2 4.8 5.0 4.3 7.1 7.8 6.3 7.2PRIVATE 21 2.3 2.9 3.4 4.4 5.9 7.7 12.0 14.6

VALUE ADOED/EMPLOYEE('000) 28 1.2 1.8 2.3 2.1 2.2 4.1 2.7 3.4PUBLIC 29 1.5 2.2 2.6 2.2 2.2 4.5 2.4 3.6PRIVATE 30 0.7 0.9 1.1 1.9 2.2 2.7 4.2 3.1WAGES AS A % OF VALUE ADOED 314 37.8 29.6 25.6 31.9 34.8 20.3 42.8 41.4PUBLIC 32 38.5 29.4 25.7 34.2 38.8 46.5 50.7 42.8PRIVATE 33 34.9 31.3 25.0 22.6 20.8 22.2 20.0 33.8

V.A. AS A % OF GROSS OUTPUT 34 34.2 42.8 48.9 50.0 32.1 50.6 37.9 25.0PUBLIC 35 35.2 45.1 51.9 52.1 31.0 57.5 38.3 25.7PRIVATE 36 30.8 33.1 33.6 42.8 37.1 35.3 32.9 21.2

----------------------------------------- ___---___-._-----------------__-----__-----_---------------_---

SOURCE:MINISTRV OF NATIONAL PLANNING,*INDUSTRIAL PRODUCTION SURVEY'.

TABLE SON/8M/I

Table 8.2

Somalia: Industrial Output of Selected Products, 1980-86

1980 1981 1982 1983 1984 1985 1986 1/

Sugar (thousands of tons) 29.1 26.8 34.1 30.8 .30.5 39.5 47.0

Canned meat (millions of tins) 0.8 -- 1.6 0.5 0.6 0.6 0.5

Canned fish (thousands of tons) 0.2 0.8 0.6 - -- --

Milk (millions of lIters) 1.2 1.4 1.1 0.5 -- - ~ 3.4

Pasta and flour (thousandsof tons) 7.5 5.9 3.1 10.6 12.6 14.3 19.3

Canned frutts and vegetables(thousands of tons) 0.4 0.7 1.1 ... ...

Textiles (millions of yards) 13.1 10.1 11.1 6.8 5.2 3.5 4.9

Boxes and bags (thousandsof tons) 3.2 3.3 3.5 6.8 5.4 5.4 6.6

Cigarettes and matches(thousands of tons) 0.6 0.5 0.5 0.4 0.3 0.3 0.2

Petroleum products (thousandsof tons) 248.4 -- 179.3 226.7 142.6 214.0 220.0

Cement (tihouisands of tons) -- -- -- -- -- 60.0

E:lectricity (millions of kwh)Production 59.8 69.1 75.7 91.9 112.0 109.0(Consumption) (58.8) (61.8) (63.6) (71.8) (100.4) (92.8)

Soarces: Data provided by the Central Rank of Somalia; and the Mintstry of Comaerce and Industry.

1/ Prellitnary estimates.

- 117 -

Table 8.3

Somalia: Manufacturing EnterprisesPerformance Indicators

1983-85

Sales Profit/Loss (-) Number ofSSo. Sh.. ill lon) (So. Sb. million) *>loer

1983 1984 1985 1983 1984- 1985 1983 1984 1985

Enterprise.

1. Juba Sugar Complex 373 289 840 Loss -52 111 1,870 1,795 2,045

2. SNAI Sugar Factory 26 26 85 -82 -89 -23 1,863 1,277 2,625

3. 0O1 Mill 1/ 4 ... ... -1.6 ... ... 80 ... ...

4. Wheat, Flour and PastaFactory 100 ... ... -7 ... ... 297 ...

5. Meat factory, Kismayc 8 17 1 - -1.4 -8.5 303 219 185

6. Millk Factory 1/ 2 ... ... -0.7 ... ... 71

7. Natlonal Bottling Company(private) 46 ... ... Proflt ... ... 160 ...

8. SNAI-BIASA 2/ 22 ... ... 227 ..

9. Cigarette and Match Factory 941 230 746 24 26.4 36.4 595 593 595

10. Somaltex 120 119 169 -10 -6.6 1.5 1,200 1,239 650

11. Foundry and Mechanical*orkshop 5 9 ... -2 -1 ... 109 120 so

12. Aluminum Utensils 10 12 4 -1.5 -6.4 0.8 85 97 155

13. Tannery Ka 7 23 ... ... 5.t ... ... 304 240 264

14. Petroleum Refinery 757 ... 1,522 ... 31.1 -7.2 179

15. Miscellaneous 263 .I. ... ... ... ... t50

Sources: Ministry of Industry and Ministry of 4ational Planning.

1/ Out of operation from 1984.2/ Included In accounts of SNAI Sugar. Factory from 1984.

PAGE 1TABLE 9.1

SOMALIA: MOGADISHU CONSUMER PRICE INDEX. 1975-85(1977-100)

…------,--------------------------------------------------------__ ----------- __ --------------------------------------------------- _ -ITEM 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

GENERAL INDEX 1 79.4 91.1 100.0 110.2 136.3 216.7 313.4 384.2 524.0 1.006.8 1.387.9(WEIGHT 100.0)

FOOD 2 76.2 86.6 100.0 112.9 137.6 244.3 343.0 364.9 512.6 1.102.4 1.249.0(WEIGIIT 60. t)

BEVRAGES & TOBACCO I/ 3 - - 100.0 106.9 123.4 165.7 234.2 290.4 559.2 1.387.4 1.863.7(WEIGHT 2.2)

CLOTHING 4 75.6 93.C 100.0 106.9 131.5 173.3 253.2 330.4 530.0 751.6 1.060.0(WEIGHT 5.6)

RENT & WATER 5 95.8 97.9 100.0 100.1 109.1 151.2 227.4 374.5 409.9 604.5 1.064.2(WEIGHT 15.3)

FUEL S L'GHTING 6 86.3 82.0 100.0 123.6 163.9 236.0 412.5 707.7 981.4 1.654.3 2.801.0(WEIGHT 4.7)

MISCELLENEOUS 7 88.7 97.3 100.0 106.5 158.2 183.8 278.5 409.0 538.3 838.5 1,972.8 '(WEIGHT 12.1)

00

1/ INCLUDED IN HMISCELLENEOUS* FOR THE PERIOD 1970-76.SOURCE: MINISTRY OF PLANNING. CENTRAL STATISTICAL DEPARTMENT.

TABLE SOM/9A/1

PAGE 1TABLE 9.2

SOMALIA: MOGADISHU CONSUMER PRICE INDEX. 1976-85(RATES OF INfLATION)

----------------------------------------------------------------- ___---------__-------------------------------------------

ITEM 1976 1977 1978 1979 1980 1961 1982 1963 1984 198S

Gf-NERAL INDEX 1 14.7 9.8 10.2 23.7 59.0 44.6 22.6 36.4 92.1 37.9(WEIGIT 100.0)

FOOD 13.6 15.5 12.9 21.9 77.5 40.4 6.4 40.5 11S.1 t3.3(WEIGIT 60.1)

BEVRAGES 8 TOBACCO 1/ 3 - - 6.9 1S.4 34.3 41.3 24.0 92.6 148.1 34.3(WEIGHT 2.2)

CLOTHING 4 24.1 6.6 6.9 23.0 31.8 46.1 30.S 60.4 41.8 41.0(WEIGHT 5.6)

RENT 8 WATER 5 2.2 2.1 0.1 9.0 38.6 50.4 64.7 9.5 47.5 76.0(WEIGHT 15.3)

FUEL & LIGHTING 6 -5.0 22.0 23.6 32.6 44.0 74.8 71.6 38.7 68.6 69.3(WEIGHT 4.7)

KISCELLENEOUS 7 9.7 2.8 6.S 48.5 16.2 51.s 46.9 31.6 55.8 13S.3(WEIGHt 12.1)

I/ INCLUDED IN *NISCELLENEOUS* FOR THE PERIOD 1970-76.SOURCE: MINISTRY OF PLANNING. CENTRAL STATISTICAL DEPARTMENT.

TABLE SOM/9A/t

-120-Table 9.3

Somalia: Quarterly Movements in the CPI, 1984-86

(1977 - 100)

8everages Rent FuelGeneral and and and Misce11a-index Food tobacco Clothing water power neous

1984I 863.8 987.9 691.8 677.7 563.3 1,105.3 650.0II 995.2 1,148.6 1,677.9 714.3 565.8 1,226.6 689.1ItI 1,058.8 1,167.2 1,609.4 781.5 594.5 1,711.4 877.2IV 1,111.7 1,105.9 1,570.3 832.8 694.3 2,57'.,1 1,137.7

1985- 1,225.3 1,173.4 1;713.1 936.7 782.5 2,654.4 1,523.6

tI 1,431.3 1,347.1 1,866.9 1,020.8 968.6 2,808.7 2,000.0III 1,418.1 1,256.5 1,927.1 1,123.1 1,093.3 2,870.5 2,100.7IV 1,477.1 1,219.0 1,947.9 1,159.5 1,412.6 2,870.5 2,267.0

1986I 1,641,1 1,370.1 2,245.5 1,249.8 1,635.8 3,202.0 2,427.6II 1,913.9 1,611,7 2,306.3 1,342.7 1,877.3 4,254.7 2,705.0

Source: Data provided by the Central Statistical Department of the linistry ofNational Planning.

- 121 -

'Table 9.4

Somalia: Retail Prices of Petroleum, 1979-86

Diesel fuel Kerosene GasolineSo. Sh. So. Sh. So. Sh. So. Sh. USS

per llter per liter per ltter per gallon per gallon 1/

1979 1.65 1.45 2.40 9.08 1.44

1980 2.15 2.00 3.00 11.36 1.80

1981August 2.90 2.80 10.00 37.85 3.01

1982January 6.53 6.00 10.00 37.85 3.01

1983June 6.53 6.00 10.50 39.74 2.60

1984November 8.30 9.85 13.00 49.21 1.89

1985January 11.00 10.26 15.00 56.78 1.58may 12.00 17.00 16.00 60.56 1.51June 13.00 18.00 17.00 64.35 1.60July 14.00 19.50 18.00 68.14 1.68August 15.75 20.50 18.75 70.97 1.75October 16.50 20.50 20.75 78.54 1.93December 18.00 20.50 23.50 88.95 2.09

1986February 19.00 20.50 25.50 96.53 1.77March 20.00 21.50 27.50 104.10 1.78Juno 20.00 21.50 27.50 104.10 1.48

Source: Xational Petroleum Agency.

1/ Converted at official exchange rate.

PACE ITABLE 10. I

SOMALIA: PRIMARY SCHOOL ENROLLMENT BY GRADE AND SEX

…-- ---- --- -- ------ -------- ---- -- -------------- __________________._______________________________________________________________

ITEM 1974 t975 1976 1977 1978 1979 t980 1981 1982 1983 t984

GRADE IMALE 1 15.940 - 82.604 40.808 25. 33 39.365 30.422 40.565 32.049 24.802 26.994FEMALE 2 8.393 - 51.001 27.448 16.498 23.598 17.850 19.244 t5.458 12.613 15.8467OTAL 3 24.333 - 133.605 68.256 41,631 62.963 48.272 59.809 47.507 37.415 42.840

GRADE 11MALE 4 14.235 - 26,129 54.182 30.969 23.397 29.407 25.660 25.608 22.379 20.484FEMALE 5 5.937 - 12.104 32.323 20.783 14.593 17.612 14.552 12.314 10.774 10.791TOTAL 6 20.172 - 38.233 86.505 51.752 37.990 47.019 40.212 37.922 33.153 31.275

GRADE 111MALE 7 10.894 - tt.177 29.356 45.160 28.801 21,978 25.642 21.356 22.379 t8.885FEMALE 8 4.051 - 4.219 12.263 27.151 18,607 13.778 15.196 11.762 10.100 9.694TOTAL 9 14.945 - 15.396 41.619 72.311 47.408 35.7S6 40.838 33.118 29.809 28.579

GRADE IVMALE 1O 7.587 - 7.674 1O.496 26.914 41.512 27.306 19.288 21.431 17.986 17.689FEMALE 11 2.456 - 2.798 4.092 t1i496 23,380 16.582 11.847 12.451 10.246 9.154TOTAL 12 1O.043 - 10.472 14.588 38.410 64.892 43.888 31.135 33.882 28.232 26.843 N

GRADE VMALE 13 5.402 - - 7.424 9.985 25.608 38.110 10.577 16.571 20.121 17.547-EMAIE t4 1.879 - - 3.001 4.169 1O.899 22.254 7.7t3 9.743 10.992 9.700lOTAL IS 7.281 - - 10,425 14.154 36.507 60.364 18.290 26.3t4 31.1t3 27.247

GRADE VIMALE 16 5.867 - 5.64t 5.645 7.274 9.868 24.963 14.660 8.827 14.124 17.636FEMAtE 17 t.866 - 1.908 1.992 3.012 4.123 10,867 7,451 6.591 8.426 9.416TOTAL Ia 7.733 - 7.549 7.637 10.286 13.991 35.830 22.111 15.418 22.550 27.052

GRADE VIIMALE 19 5.344 - 5.235 - - - - 14.323 12.959 8.222 12.543FEMAIE 20 1.581 - 1.697 - - - - 10.534 6.690 5.706 7.455TOTAL 21 6.925 - 6.932 - - - - 24.857 19.649 13.928 19.998

GRADE VitlMAIE 22 4.235 - 5.531 - - - - 22.936 15.239 14.672 10.005FEMAtE 23 1.236 - 1.799 - - - - 11.516 10.847 7.854 6.941lOTAL 24 5.471 - 7.330 - - - - 34.452 26.086 22.526 t6.946

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TOtAt - MALE 25 69.504 - 143.991 147.911 145.435 168.551 172.186 173.651 154.040 142.015 1417837OTAL - FEMALE 26 27.399 _ 75.526 81:119 83,109 95.200 98.943 98.053 85.856 76.711 78.997GRAND TUTAL 27 96.903 - 219.517 229.030 228.544 263,751 271.129 271.704 239.896 2t8.726 220.730

1/ ItN 1975. SCHOOLS WERE CLOSED DUE TO A CRASH LITERACY PROGRAN.

SOURCE: MINISTRY OF EDUCATION

lAUILE SUM/I1/1 I

PAGE 1TABLE 10.2

SOMALIA: SECONDARY SCHOOL ENROLLMENT BY GRADE AND SEX----------------------------------------------------------- _-------------__--__--------------------------------------------------_--

ITEM 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1964

GRADE IXMAIE 28 2.759 - 1,574 4.813 4.979 6.669 7,551 18.846 15.422 10.8668 8.624FEMALE 29 624 - 253 1,809 1.911 2.188 3.150 7.606 7.277 6.908 4,249TOTAL 30 3.383 - 1.827 6.622 6.890 8.857 10.701 26.452 22.699 17.776 12.873

GRADE XMALE 31 2.172 - 2.512 2.629 2.489 4.913 5.605 7.157 16.143 15.166 10.596FEMALE 32 451 - 490 475 685 2.021 1.891 2.515 7.048 7.317 6.705lOTAL 33 2.623 - 3.002 3.104 3.174 6.934 7.496 9.672 23.191 22.480 17.301

GRADE XIMALE 34 2,030 - 1.765 1.725 2.050 2.084 2.903 4.322 5.042 12.657 12.522FEMALE 35 345 - 260 437 550 577 975 1.282 1.940 5.414 5.440TOTAL 36 2.375 - 2.025 2.162 2.600 2.661 3.878 5.604 6.982 18.071 17.962

GRADE XIIMALE 37 t.766 - 133 1.371 1.137 1.774 1.689 2.645 3.661 4.724 10.770FEMALE 38 353 - 59 407 377 575 609 1.118 1.197 1.948 5.463lOTAL 39 2.119 - 192 1.778 1.514 2.349 2.298 3.763 4.858 6.672 16.253

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TOTAL - MALE 40 8.727 - 5.984 10.538 10.655 15.440 17.748 32.970 40.268 43.415 42.512TOTAL - FEMALE 41 1.773 - 1.062 3.t28 3.523 5.361 6.625 12.521 17.462 21.587 21.877GRAND TOTAL 42 10.500 - 7.046 13.666 14. 178 20.801 24.373 45.491 57.730 65.002 64.389

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1/ IN 1975. SCHOOLS WERE CLOSED DUE TO A CRASH LITERACY PROGRAM.SOURCE: MINISTRY OF EDUCATION

TABLE SOM/11/2

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