Page 14 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.74, # 2, 2017, pp. 4-31

investment and expanded activities, including those investment activities related to foreign
private investors and private-public partnership (PPP) undertaken and associated activities.

It is believed that this hopeful scenario’s growth rate is quite plausible and achievable,
particularly, when more political stability and improved security situation in the country realised.
Together with more investment funds are obtained and directed towards productive sectors and
infrastructure activities that facilitate the aimed at expanding of products and growth of the
productive sectors, particularly, large-scale and integrated infrastructure development, which
focusing on the expansion of the road network, storages, production processes and technologies,
and the provision of renewable energy. These including community based infrastructure and
development projects. Besides, private sector is promoted, and right and credible environment is
created to increase its role in productive investment, economic activities, employment generation
and overall growth. This also attainable when financial sector is relatively reformed to create
active, reliable and credible banking systems and the right financial institutions, with nationally
devised and development oriented monetary policy. This scenario envisages enhancing the
expansion of the leading productive sectors, such as agriculture, livestock, fisheries, primary
inputs related manufacturing industries, value-chain activities, creating employment
opportunities, especially for the young segment of the society, and improving labour productivity
through development and expansion of technical education and vocational training coupled with
efficient as well as optimal mix of capital and labour in production process and techniques.
These all should be supported with growth in investment activities and facilitating, legally and
otherwise, the operations of private sector to lead the planned economic growth and development
aspiration of Somalis.

Accordingly, the approach we have adopted to achieve a balanced macroeconomic setting and a
realistic development path and sustainable growth and outputs during the coming three calendar
years (2017-2019), was based on an aggregated and integrated macroeconomic model, linking
the level of donors activities to the level of investment, consumption, savings, government
spending, exports and imports, and then to the rate of economic growth. The model, however, is
developed so that the dualistic nature of the economy is incorporated into the expenditure
(demand) functions. This dualism distinguishes between the impact of donors’ activities, funds
and exports, government expenditures, revenues, and the autonomous economy on other
economic variables. To take account of this dualism, the models separate donors’ activities and
other elements of GDP, and specify the production capabilities accordingly. The aggregated
macroeconomic and fiscal model for Somalia specifies the interactions among various
components of the final demand.

This modelling approach is an expenditures-based rather than an output- based model. Hence the
starting point is the accounting identity. The used aggregated macroeconomic model has been set
up such that donor funds serve as the main driving force of the economy. These funds determine
the investment magnitudes, government revenues and hence expenditures, and exports/imports.
Another element that contributes to total investment is the private sector (donors, NGO’s and

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