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June 3, 2019

Building cooperative fiscal federalism in Somalia

This study, conducted by the National Economic Council (NEC) Advisors (NEA) in association with expert consultants, contributes to a better understanding and promotion of cooperative fiscal federalism in Somalia. The study also aims to provide technical and policy recommendations on all aspects of fiscal federalism, including the development of institutional and legal frameworks essential for successful fiscal federalism. In particular, the study focuses on outlining the building blocks and operational aspects of fiscal federalism in Somalia that will deliver the decentralization mechanisms and institutions which are currently lacking in the country. The contents of the rest of this paper are summarized as follows. Section 2 reviews the status of fiscal federalism in Somalia with an emphasis on institutional structures, implementation of the PC and challenges. Assignment of expenditure and revenue powers in the context of the provisions of the PC are discussed in Section 3, which also provides recommendations that could be considered in the ongoing CRP. Section 4 analyses the sharing of revenues from natural resources, while Section 5 addresses intergovernmental fiscal transfers, with emphasis on the theoretical basis for transfers and recommending appropriate alternatives for Somalia. Section 6 concludes with findings and recommendations.

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