Does international monetary aid help or hinder Somalia's social economic revival?

DOIhttp://doi.org/10.1002/pa.1595
Date01 November 2016
Published date01 November 2016
Academic Paper
Does international monetary aid help or
hinder Somalias social economic revival?
Mohammed Hersi Warsame
1
*and Edward Mugambi Ireri
2
1
Department of Finance and Economics, University of Sharjah, United Arab Emirates
2
ITROMID, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Somalia government has been accused of lacking transparency and proper accounting systems. This study investi-
gates international monetary aid in Somalias social and economic revival. A purposely chosen sample of Somalis liv-
ing in Kenya (N= 204) was used. Approximately 59.4% disagreed that the lives of a great number of Somali people
have improved, while 65.2% acknowledged that there was lack of integrity and expertise in the management of for-
eign aids. Finally, the study suggests that the key to success of monetary aid in Somalia largely depends on; develop-
ing good nancial infrastructure based on modern information technology and telecommunication, the establishment
of strong nancial institutions with good nancial and aid policies, and enhanced transparency and rigorous account-
ability of Somalia government ofcials. Copyright © 2016 John Wiley & Sons, Ltd.
INTRODUCTION
The International Monetary Funds (IMFs) purpose
and scope were initially aimed at maintaining mon-
etary and exchange-rate stability among a mostly in-
dustrialized membership Kenen (2007). Nowadays,
membership is comprised mostly of developing
countries, ranging from large, emerging markets to
small, impoverished states, with crisis management
as the funds primary task.
The Somali Republic was founded in 1960 Gray
(1989). It was then one of the poorest countries in
the world, and it remains so now after 55 years. In
1969, Somali military ofcer Siad Barre seized
power via a military coup and declared Somalia a
socialist state (Norris, 2011). Since toppling of Barre,
effective national governance has never been re-
stored despite multiple efforts by Somalis and the
international community. The US State Department
estimates that around $2bn a year are directed to-
wards Somalia in remittances, while the World Bank
estimated at different junctures that Somalia was
the most remittance-dependent country in the
world (Maimbo, 2011).
Evidence proves that decades of foreign aid have
not changed the future of many African states in-
cluding Somalia. Estimates suggest that the West
has spent about $600bn on foreign aid to Africa so
far Akonor (2008), yet underdevelopment is wide-
spread and some African stateslike Somaliaare
considered to have collapsed (Andrews, 2009). This
can be perfectly illustrated with the fact that the UN
Development Program usually does not even rank
Somalia on its Human Development Index, simply
because there is not enough available data for the
country (Norris, 2011). As of August 2010, Somalia
was in arrears to the IMF for $365.7m, to the World
Bank for $231.3m, and to the African Development
Bank (ADB) for $85m, amounting to a total of
$682m in unpaid debts (IMF, 2005). Somalias out-
standing debts account for 17% of the total arrears
owed to the IMF. As a result of this instability, a dec-
laration of its unsuitability to access IMF resources
has been in place since 6 May 1988 (Gray, 1989).
In 2012, the World Bank reported a pattern of aid
mismanagement in Somalia, but already prior to
that, in 2009 and 2010, about $130m delivered to
the transitional government seemingly disappeared
*Correspondence to: Mohammed Hersi Warsame (PhD), Depart-
ment of Finance and Economics, University of Sharjah, United
Arab Emirates, Box 27272, Sharjah, United Arab Emirates.
E-mail: mhwarsame5@hotmail.com
Journal of Public Affairs
Volume 16 Number 4 pp 350358 (2016)
Published online 23 February 2016 in Wiley Online Library
(www.wileyonlinelibrary.com) DOI: 10.1002/pa.1595
Copyright © 2016 John Wiley & Sons, Ltd.

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