SOMALILAND: Local taxes, overseas remittances to the rescue

By  FRED OLUOCH, Special Correspondent, East African Magazine

Somaliland-mapWithout international recognition, Somaliland is deprived of foreign aid and foreign direct investments and cannot borrow from the World Bank and International Monetary Fund.

The country has to depend on taxes, inland revenues, Customs and remittances from its nationals in the diaspora to raise revenue for running the government.

The current government of Ahmed Mahamoud Silanyo is looking at a $130 million budget to be read in September. In the past financial year, the government met 76 per cent of its tax collection target.

“We want our people to first try to fund the government operations before they look for funding from other countries,” said the Director-General (Permanent Secretary) in the Ministry of Finance, Suleiman Jama Diriye.

The country depends on its diaspora, who remit about $400 million to relatives back home.

Landlocked Ethiopia is Somaliland’s biggest trading partner. Ethiopia imports livestock from Somaliland and uses the port of Berbera for its imports and exports. It also supplies Somaliland with agricultural produce and the stimulant herb khat.

Livestock contributes 65 per cent to the country’s economy. The country exports some 3-4 million heads of livestock to the Middle East annually, with Saudi Arabia being its main market.

One of the major challenges for Somaliland is unemployment, which stands at 80 per cent. But Somaliland has a lot of potential. Besides the availability of untapped oil and gas both inland and offshore, Somaliland has minerals and metals, including the much-sought after coltan.

Currently, there are several international companies carrying out oil exploration in Somaliland. They include Anglo-Turkish Gennel Energy, D.N.O of Norway and Ophir Energy of the UK.

Its 850 km coastline has huge economic potential. Apart from limestone deposits, the warm waters of the Gulf of Eden are rich with fish, but remain largely untapped. The Food and Agricultural Organisation estimates the fish in Somaliland waters at 200,000 tonnes.

The port of Berbera is also underutilised. With a natural deep harbour, Berbera is strategically located on the maritime lane of the Gulf of Eden where about 30,000 ships pass every year to and from Europe, the Middle East, Asia and other African countries.