Government Expenditure Generation Suffers, Somalia’s Central Bank Lends Untraceable Funds

Written by Makula Dunbar

Jul 02, 2013

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.

The confidential report by the U.N. Group of Experts to the Security Council’s Somalia and Eritrea sanctions committee blamed a patronage system – dubbed the “khaki envelope” practice after the color of the stationery carried to the Ministry of Finance – for preventing the creation of state institutions.

“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.”

PricewaterhouseCoopers, Omer and the Somalia U.N. mission did not immediately respond to requests for comment.