Page 30 - Azerbaijan State University of Economics

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

these three revenue components. With this existing structure in mind, we have attempted to
estimate these components, utilizing their functional correlations with, amongst others; income,
GDP and trade volume that have been forecasted and driven for the economy for the period 2017-
2019 and presented within the plan macroeconomic framework derived earlier and stated above in
this paper. These estimates also based on the assumptions that there would be some concerted
efforts by the government to carry out real improvement in the tax regime, including issuance of
the new tax-law, increasing tax base and enhancing tax collection and administrative process and
capabilities. However, most importantly these revenue estimates are also based on the fact that
assumption of the planned and incurring higher level of investment, at different sectors and
activities level, in Somali economy, during the SNDP period, would be realized and achieved,
particularly, the planned investment in the infrastructure and services sector. This also would be
complemented and associated with increased level of imports particularly those of machineries and
equipment into the national economy, which needed to support planned investment.

The table below shows the likely public-sector accounts during the SNDP period. This reflects
both the likely domestic revenue that can be generated from both taxes and non-taxes sources,
and government expenditure that is depicting the main estimates and setting of the Somali
macroeconomic framework and outlook. This is besides rationalization and resources
reallocation to key areas of priority, and applying the principle of cost-effectiveness in spending
of public funds. Thus, this would be based on the assumption of the “hopeful” growth scenario of
the economy during the plan period, which would, hopefully, ensure the consistency of
government budget with the national economy’s absorptive capacity, and hence, curtailing the
level and the rate of likely inflation generated in Somalia, during the coming three years [This is
the case in the Somali economy, due to the fact that the economy is fully dollarized economy,
and hence, there are full absence of monetary policy instruments. Accordingly, curtailing
inflation is quite limited as there is no monetary policy, such as using exchange rate, interest rate
and/or money supply regime to tackle inflation, so curtailing inflation in Somalia, in this
circumstance, can only be approached through fiscal and other economic related policies.].

Somalia Likely Public Accounts Outlook for the period 2016-2019
Compound As % of
2016 (in 2019 (in As % of GDP
Component Growth Rate GDP
$m) $m) of 2016
(%) 2019
Domestic Revenue 125.2 222.1 21.1 2.04 3.09
Tax on Income, profit and capital gain 5.0 13.9 40.6 0.08 0.19
Tax on goods and services 13.0 39.1 44.3 0.21 0.54
Tax on Trade (Customs Duties) 75.7 132.2 20.4 1.23 1.84
Non-Tax Revenue 31.5 36.9 5.4 0.51 0.51

Recurrent Expenditure 222.2 320.3 12.9 3.62 4.45

Source: Integrated Modelling Results

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