State-building and legitimacy in countries emerging from fragility are closely linked to the concept of a social contract. In nations where young people have only experienced statelessness, constructing a new social contract from scratch is essential.
A new publication titled “Toward Building Somalia’s Social Contract: State Affordability, Revenue Mobilization and Service Delivery in a Nascent Federal State” highlights key challenges in state-building for Somalia. It offers evidence-based options to address these issues while acknowledging the difficult choices ahead.
Somalia has made notable progress since 2012 after decades as a failed state engulfed in conflict. It has adopted a provisional constitution and established a federal structure. However, questions remain about what kind of state Somalia can afford given its low revenue base and dependence on external grants.
The domestic revenue-to-GDP ratio in Somalia stands at just 2.5%, one of the lowest globally, hindering its ability to provide essential services. The publication estimates that by 2030, with current revenue trends, Somalia can only afford basic education and health services for 25% of its population. To reach 50% coverage, domestic revenue must increase to at least 9% of GDP; full coverage requires at least 15%.
Recent efforts show potential for increasing this ratio to 4.5% by 2030. Sustainable enhancement will require expanding the tax base, implementing progressive income tax, aligning customs legislation with East African Community standards, reforming indirect taxation like excise taxes, and finalizing tax harmonization across the federation.
On service delivery, gaps persist within Somalia's federal framework. While citizens prefer public facilities, they often resort to private or traditional providers due to unavailability of public services. A collaborative approach involving all government tiers and partnerships with private providers could improve service delivery.
Incorporating more official development assistance (ODA) into the national budget could enhance coordination and efficiency in delivering services like justice systems. Addressing local capacity gaps is crucial for maximizing decentralization benefits without merely expanding administrative payrolls at sub-national levels.
These recommendations are not directives but should be considered policy options requiring stakeholder engagement to inform Somalia's Centennial Vision of 2060.