Somalia owes around $4bn, most of it interest and penalties on nearly three-decades-old loans made to the former military government of Mohamed Siad Barre, whose overthrow in 1991 plunged the country in the Horn of Africa into years of lawlessness and civil war.
Those arrears make it almost impossible for Mogadishu to access new funds from the International Monetary Fund or the International Development Association, the soft loan arm of the World Bank that has money earmarked specifically for fragile states like Somalia.
Officials working with the new Somali government, which took office in February last year, describe the administration as the best in decades and complain that lending restrictions are hampering its efforts to fight al Shabaab, a militant Islamist group, and to build a functioning state.
Last year, the Somali government headed off famine in parts of the country with international help. Al Shabaab has been pushed back, but is still able to carry out deadly terrorist attacks, such as bomb blasts in Mogadishu in October in which more than 350 people were killed.
In an interview with the Financial Times, Hassan Ali Khayre, the prime minister, said of efforts to establish a functioning administration: “Now we have turned a page and taken bold steps, we are hoping the world will take a little more risk on Somalia.”
Mr Khayre, a former aid worker and oil executive, said the government had a budget of only $274m, which was not enough to create the social programmes needed to prevent radicalisation of unemployed youth or to address deprivation. He could not confirm an estimate, made by one World Bank official, that al Shabaab had a bigger budget than the government.
“Certainly, ours is a very tiny budget for a country of 10m people,” he said. “Fighting terrorism needs good governance. It means providing services for our people. To do this costs money and that’s why we need the support of the international community.”
Only the Somalis are going to defeat al Shabaab. And if they are going to do it they are going to have to be able to pay for it said Michael Keating, Special Representative of the UN Secretary-General for Somalia.
Mr Watkins, who has exchanged letters on the subject with Christine Lagarde, IMF managing director, described what he said was IMF foot-dragging as “inept, misplaced and embarrassingly complacent”.
Mohamed Elhage, who leads the IMF’s Somalia mission, said the country was “marking important milestones on reform and policy implementation”, although it needed to make stronger efforts to improve fiscal discipline and raise tax revenue.
The head of the Atlantic Council’s Africa Center in Washington, Peter Pham, said multilateral institutions were right to be cautious before flooding Somalia with money. “It’s déjà vu when the dilettantes in the international community get excited about the Somali government,” he said. “Let’s not flood the country beyond its capabilities to absorb.”
Mr Pham accepted that the new government had made progress but said he was not convinced that corruption had been brought under control. “Huge amounts of aid in cash simply disappears,” he said, adding that he suspected up to half of the 27,000 soldiers being paid to fight al Shabaab with western help were “ghost soldiers”, drawing a salary without doing any fighting.
Of the government’s limited budget, he said: “I’ve yet to figure out what they do with that $250m other than to travel to conferences and to pay parliamentarians whose absentee rate is atrocious.”
Michael Keating, the Special Representative of the UN Secretary-General for Somalia, said he thought the new government was worthy of support. “I’m a bit of a cheerleader for Somalia. This government is on a steep political learning curve but has serious agenda,” he said.
“Only the Somalis are going to defeat al Shabaab. And if they are going to do it they are going to have to be able to pay for it,” he added. “That’s the reason why getting to arrears clearance and HIPC debt relief is so important.”