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Africa Horn | |||||||
Somalia Central Bank a 'slush fund' for private payments | |||||||
2013-07-03 | |||||||
NAIROBI - Money at the Central Bank of Somalia is not used to run government institutions in the war-torn Horn of Africa country, with an average 80 percent of withdrawals made for private purposes, according to a U.N. report seen by Reuters on Monday.
"In this context, the fiduciary agency managed by PricewaterhouseCoopers was reduced to a transfer agent that could not ensure accountability of funds once they reached the Somali government," the report said. "Indeed of $16.9 million transferred by PWC to the Central Bank, $12 million could not be traced," it said. "Key to these irregularities has been the current governor of the Central Bank, Abdusalam Omer."
Omer, 59, is a dual Somali-U.S. national who left Somalia at age 16 and returned in January to become governor of the Central Bank in a country with a shattered economy and broken financial system. The U.N. report said all bank decisions were made by Omer because there were no board members in place
"On average, some 80 percent of withdrawals from the Central Bank are made for private purposes and not for the running of government, representing a patronage system and a set of social relations that defy institutionalization of the state," it said.
Under the patronage system, a person can ask Somali leaders for a private payment "that cannot be resisted for personal or other reasons," the U.N. report said. A senior politician signs a note authorizing the payment, which is honored either directly at the Ministry of Finance or the Central Bank, the report said. "This custom is also called the 'khaki envelope' procedure on account of the color of the envelopes seen carried to the Ministry of Finance," it said. "Since banks in Somalia, including the Central Bank, cannot make electronic transfers internally or externally, all transactions are made in cash." The report found that between September, when the new government of President Hassan Sheikh Mohamud came to power, and April, almost three-quarters of withdrawals from the Central Bank were made for private individuals. "Such statistics indicate that the CBS has effectively functioned as a 'slush fund' for the (patronage) system rather than as a financing mechanism for government expenditures," the U.N. experts said. The report noted that Mohamud's government "cannot necessarily be faulted for the continuing patterns of corruption per se, but it can be held responsible for the appointment of individuals involved in past or present corruption." According to Central Bank accounts, a cashier at the Ministry of Finance, Ahir Axmed Jumcaale, was responsible for withdrawing the greatest amount of funds.
The International Monetary Fund officially recognized the Somali government in April, ending a 22-year hiatus, and last week offered technical support and advice, a first step in efforts to secure debt relief for the country. Also last month, the Central Bank of Somalia published its first annual report since civil war erupted in 1991, putting the total debt at $3.2 billion. To win debt relief offered to poor nations, it has to draw up a financial management plan.
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Posted by:Steve White |