HARGEISA, January 29, 2014: Since its self-declaration of independence in 1991, Somaliland has – against many odds – established a system of democratic governance and embarked upon an ambitious development agenda including development of a National Development Plan (NDP 2012-16).
To help strengthen planning and budgeting processes, and improve the allocation of scarce resources, the World Bank has undertaken several pieces of analytical work to help provide the first GDP and poverty estimates for Somaliland. These will be discussed at the Somaliland Economic Conference on Growth & Unemployment, Poverty & Inflation and Budget Policy hosted by the Ministry for National Planning and Development and the World Bank in Hargeisa on 29 January, 2014.
1. GDP and Unemployment
Based on initial GDP analysis -to be updated as data improves and further data becomes available- Somaliland’s GDP for 2012 is estimated to have been $1.4 billion (current US$ prices), with GDP per capita estimated at $347. This would be the fourth lowest in the world, ahead of Malawi, the Democratic Republic of the Congo and Burundi.
Almost 30% of GDP is derived from the livestock industry followed by 20% from wholesale and retail trade (including the informal sector); 8% from crops and 6% from real estate activities. In 2012, Somaliland’s trade deficit was approximately $496 million, which was financed through a combination of remittances and external aid. Somaliland has very low levels of investment, ranked approximately 180th in the World for gross fixed capital formation as a percentage of GDP. Furthermore, Somaliland has very low employment-to-population ratios, with 28% for males and 17% for females (15-24 year olds in Borama, Hargeisa and Burao).
2. Poverty & Wellbeing
Initial estimates suggest that poverty in urban areas of Somaliland is 29%, similar to Ethiopia (26%) but that rural poverty at 38% in Somaliland is higher. Although urban households are better off, inequality is high and similar to levels recorded in the 2005 household survey in Kenya.
Access to health services in urban areas compares well to other countries in the region, but in rural areas most births are at home without a skilled attendant. Mothers are more likely to die giving birth, and babies more likely to die before their first birthday, in Somaliland than in neighboring Ethiopia or Djibouti.
Only about half of 6-13 years olds go to primary school in Somaliland, in stark contrast to 87% in neighboring Ethiopia. As current school enrollment is much lower in Somaliland than in all countries in the region, Somaliland could well have poor comparative literacy rates in the future.
3. Budget Policy
Tax revenue as a percentage of GDP in Somaliland (approximately 7% in 2012) is less than half the sub-saharan African average. Historical low levels of domestic revenue have only been able to sustain core Government functions and maintain peace and stability. The lack of investment in social services, has taken a toll on human development. The Somaliland authorities have taken recent, commendable, strides in strengthening budgeting and planning and enhancing revenue, and the Budget Policy Committee now ring-fences 10-13% of the growing budget for investment activities. Establishment of the Somaliland Development Fund (SDF) has also enabled Government to exercise greater control over external resources.
However, reform of key sectors is needed to sustain revenue generation and create a more competitive economy. The absence of a conventional financial system is significantly hindering access to finance which is the number 1 constraint on private sector activity in Somaliland. Improving public service delivery is vital through revising decentralization policies, civil service reform and implementing the Public Financial Management (PFM) Reform Strategy 2013-2017. The influence of the private sector must not prevent the Government harnessing revenues by adopting a tax strategy with a focus on consistent and moderate taxation of large corporations, to help bring the Somaliland tax to GDP ratio more in line with regional averages.