World Bank Halts Major Projects in Somalia Over ‘installed’ AG Concerns

The World Bank has halted most of its development projects in Somalia, citing a lack of faith in the newly ‘installed’ Auditor General as the primary reason for their action, Horn Examiner has learnt.

This move has raised concerns about the future of ongoing development initiatives in the country which is recovering from decades of civil war which left the country’s infrastructures destroyed.

The newly appointed Auditor General of Somalia, Ahmed Isse Gutale, a former local radio journalist, has faced criticism regarding his alleged lack of experience and skills in the field of auditing and corruption concerns raised by the Somalia donors.

Since his appointment, questions have been raised by officials and International Financial Institutions (IFI) about Gutale’s qualifications, and his performance has come under scrutiny.

These concerns have alarmed Somali authorities who fear that his appointment and retention of Gutale as Auditor General could have detrimental effects on the government’s credibility and create misperceptions among international donors.

They worry is that this situation could ultimately jeopardize the collaboration with the International Monetary Fund (IMF) and the World Bank.

Senior Somali officials who spoke to the Horn Examiner have revealed that the World Bank Group, a major supporter of development projects in Somalia, has informed the Somali government last month that it made the decision to suspend all ongoing initiatives until the matter concerning the Auditor General whose appointment it subsequently termed as ‘installed’ is addressed and resolved.

The Bank’s decision is driven by lack of trust in Gutale’s abilities, which has cast doubts on the integrity and effectiveness of financial oversight within the country, the officials say, noting that according to the notice shared with the government, the primary objective of the suspension is to guarantee the appropriate utilization of funds and resources.

In the wake of this, concerns are also being raised that the suspension of development projects in Somalia could have far-reaching implications for the country’s progress and its collaboration with International Financial Institutions.

Meanwhile, experts have warned that the move by the World Bank sends a strong message emphasizing the importance of having competent and trustworthy individuals in key positions, especially those responsible for financial oversight and auditing rather than appointees being selected based on their loyalties and political affiliations.

Gutale, 37, a former journalist of a local radio station, had previously served as a member of Somali President Hassan Sheikh Mohamud’s election campaign and was believed to have played a role in the campaign as one of members of his communications team. His association with the president’s campaign is believed to have contributed to his appointment as Auditor General, despite lacking the necessary qualifications or expertise for the position.

Despite the crisis, Somali authorities say they now face the task of addressing the concerns raised by the World Bank in a bid to restore confidence in the role of the Auditor General, a process that may involve reviewing his appointment process and ensuring that future candidates for such positions possess the necessary qualifications and experience.

UNDOING FRAGILE PROGRESS

In the meantime, the suspension of development projects is likely to have a significant impact on various sectors in Somalia, including infrastructure, education, healthcare and agriculture.
The delay in funding and implementation of projects ad result of the controversies surrounding the Auditor could hinder progress and affect the livelihoods of the Somali people who rely on these projects for their economic and social well-being.

According to a World Bank official who is knowledgeable about the situation, the choice of the Auditor General by the Somali President has baffled both the bank and other international partners.

The official who asked to remain anonymous said that the background and qualifications of the new Somalia Auditor General sharply differ from those of previous holders of this crucial position, as well as from the auditors general of neighboring countries alike.

“Typically, candidates for such a role are expected to possess extensive knowledge, experience, and a non-partisan approach, ensuring their integrity and contributing to the strengthening of the country’s financial system.” The Western official noted.

“There is an incredible and concerning disparity between Mr. Gutale and his regional counterparts, or even his predecessors which raises a serious alarm.”

The dispute involving the Auditor General is a significant blow to President Mohamud, spelling additional troubles that may affect Somalia’s standing with international donors who have been supporting the country’s efforts in earning the much-needed debt relief.

However, the International Monetary Fund (IMF) and the World Bank have made it clear that Somalia must take certain measures before it can qualify for debt relief.

These measures include reducing its external debt of $5.2 billion to approximately $557 million. To achieve this, Somalia needs to implement economic reforms, such as enhancing public financial management, oversight and increasing domestic revenue.

In addition to that controversy, the country is also grappling with allegations of corruption involving shady deals by ministers and high-ranking officials, further worsening the crisis and erode public confidence in the government.

DONORS CONCERNED BY ‘INSTALLED’ AUDITOR

The appointment of the new Auditor General has also raised concerns regarding the independence of the Office of Auditor General of the Federal Government.

In a letter dated 11 February 2023, issued by the African Organization for Supreme Audit Institutions (AFRO SAI) and obtained by the Horn Examiner, it was highlighted that the current process for the removal and appointment of the Auditor General of Somalia contradicts the national efforts to establish a new legal framework aligned with the globally accepted principles of the INTOSAI Mexico Declaration on Supreme Audit Institution independence.

This internal letter has also warned that the situation poses a risk to the establishment of an independent oversight institution capable of effectively addressing national challenges related to public resources use, accountability, transparency, and anti-corruption measures.

AFROSAI also pointed out that the replacement of the former Auditor General of Somalia by President Mohamud violates the principles outlined in the Mexico Declaration as well as the Audit Bill approved by the National Assembly.

The 2020 Audit Bill aimed to modernize the outdated Audit Act of 1972 and ensure the presence of a modern and independent audit office, as stipulated in Article 114 of the Constitution. The letter expressed concern that the Somali Audit Bill, which was approved by Parliament, has not yet been signed and implemented as a legal instrument.

The independence of the Office of the Auditor General is crucial in establishing an effective and credible institution that serves as a pillar of parliamentary democracy, transparency, accountability, and the fight against corruption. It is also recognized as a vital mechanism for ensuring independent oversight of development funds.

AFROSAI further urged the Government of Somalia to guarantee the independence of the Office of the Auditor General through an appropriate process for the appointment and removal of the Auditor General. This would demonstrate the government’s commitment to accountability and showcase decisive action in reforming public financial management for the benefit of its citizens.

AFROSAI has however retracted its initial statement and has instead sent congratulations to the new Somali Auditor General, in a letter dated 22 February 2023. Mr. Gutale has since received an invitation to attend the AFROSAI-E Governing Board meeting from 8 to 11 May in Accra, Ghana, as per their letter.

WORLD BANK WARNING

There has been no public statement by the World Bank regarding this matter. The Horn Examiner’s attempts to contact the bank’s officials were unsuccessful.

However, in an internal memo sent to the Ministry of Finance, the World Bank officially expressed concerns over the matter and raised it with the Somali government, saying it remained concerned about the continued delay to ensure enactment of the 2020 Act of the Office of the Auditor General of Somalia (Audit Bill).

“We understand that the bill was passed by both houses of parliament but is yet to be signed into law by the President,” the Bank said in a letter dated 03 March, 2023, addressed to the Minister of Finance Dr. Elmi Nur.

The World Bank also expressed concerns over the manner through which the president appointed the Auditor General, terming it ‘installed’ amid questions over its legality.

“In addition, we understand that a new Auditor General has been appointed and installed – before a modern legal framework governing such appointments was enacted,” the letter noted.

“In this context, we would like to highlight the following risks to our specific financial and technical engagements, which require an independent and capable supreme audit institution:” the Bank warned.

In light of the concerns that resulted in challenges faced by the Somali government in revenue collections, the World Bank has since taken action by suspending its International Finance Corporation (IFC) projects in the country that focused on economic development and private sector growth.

However, in the face of the crisis, the Ministry of Finance has raised tariffs on the imports to cover basic salaries.
This stands in stark contrast to the progress made by Somalia under the previous administration, which in turn received 9 million dollars in budget support from the World Bank, thanks to the effective financial management mechanisms it had implemented.

Consequently, the Bank’s decision to increase the current budget support to 14 million dollars, making a five million dollar increase, is viewed by Somalia’s international partners and experts as a significant blow in efforts to improve the country’s financial management system—an essential requirement for the debt relief.