UNCDF Local Development Fund: Somalia's Fiscal Decentralisation Success Story

Mkhululi Ncube and Amadou Sy from UNCDF share highlights of a success story in Somalia where the Local Development Fund (LDF) improved fiscal decentralisation over the last fifteen years.

LDF investments since 2011 (© 2022 UNCDF)

Mkhululi Ncube and Amadou Sy from UNCDF share highlights of successes from the Local Development Fund (LDF) − a discretionary, multi-sectoral, performance-based grant for local governments. LDF has created a relatively simple, objective, fair, reliable, and predictable intergovernmental fiscal transfer system that can easily be upscaled.

The LDF uses a transparent allocation formula and incorporates a performance component that promotes a high degree of compliance with public finance management best practices and procedures. The fund is capitalised by development partners through the Joint Programme on Local Governance and the different states and districts, stimulating high levels of community ownership. Ten years ago, intergovernmental transfers were rare, unpredictable, and small but over the last decade fiscal decentralisation footprints of local governance reforms have grown. Currently, different levels of government are able to work together in planning, contracting, overseeing, and paying for goods and services.

This article by UNCDF presents a best practice in the broader fiscal decentralisation area in Somalia. These successes have been achieved despite ongoing conflict, natural disasters, food and water insecurity (made worse by the Ukraine-Russia conflict), and the COVID-19 pandemic. Somalia, with the support of the United Nations Joint Programme on Local Governance and driven by the United Nations Capital Development Fund (UNCDF), started the fiscal decentralisation process. The LDF is UNCDF’s flagship project in Somalia and designed to promote equitable and effective service delivery and infrastructure development. It aims at enhanced legitimacy of fledgling local governments. The article names six objectives, which are: 

• To provide discretionary capital and sectoral grants at the local level 
• To incentivise fiscal decentralisation reforms 
• To develop planning, budgeting, budget utilisation, monitoring, and evaluation, and reporting capacity at the local government level 
• To provide resources for local development and service delivery 
• To develop and enhance own revenue mobilisation for municipalities 
• To promote good governance and decentralised service delivery 

The example of Somalia also shows the results of UNCDF’s Local Development Fund: three of the districts that have been supported by the fund, have been able to gradually phase out their dependence on the LDF by increasing own revenues and putting in place robust systems and public procurement procedures. Local services in the districts are now funded mainly through state transfers and their own-source revenues, mentioning that they still depend on other technical and development fundings. 

Read more on UNCDF’s Local Development Fund here.