Public Financial Management Reform in the Banadir Regional Administration

Overview

The Banadir Regional Administration (BRA), which governs Mogadishu, has undertaken a significant Public Financial Management (PFM) reform program in a highly fragile, post-conflict environment.

This report documents BRA’s reform journey from an extremely weak PFM baseline in 2023 to measurable institutional improvements achieved by April 2025.

The analysis is based on:

A 2023 Public Expenditure and Financial Accountability (PEFA) assessment.
A review of reform implementation between 2023 and 2025.
Donor benchmarks and compliance assessments.
Comparative PEFA performance analysis.

A qualitative case study methodology was adopted using:

Official government documents.
Reform implementation reports.
Donor compliance records.
Comparative PEFA assessments.

Baseline Situation (2023)

The 2023 PEFA assessment revealed that BRA’s Public Financial Management system was at a very early stage of development.

Key findings included:

All core PFM indicators were rated at the lowest PEFA "D" level.
BRA operated without a formal PFM legal framework.
Budget preparation lacked standardized procedures.
Expenditure controls were weak.
Financial reporting systems were unreliable.
No annual financial statements had ever been prepared.
No external audit had been conducted.
Revenue management was fragmented and partially off-budget.
Procurement systems lacked adequate controls.
Intergovernmental fiscal transfers were unpredictable.

These weaknesses significantly undermined:

Fiscal discipline.
Transparency.
Accountability.
Efficient public resource management.

Reform Progress (2023–2025)

Between 2023 and 2025, BRA implemented a focused Public Financial Management reform program with support from national institutions and international development partners.

Major achievements included:

Introduction of a Unified Chart of Accounts (UCoA) aligned with Federal Government standards.
Standardization of the budget formulation process through:
- Budget manuals.
- Budget calendars.
- Standardized procedures.
Timely approval and publication of:
- Annual budgets.
- Citizen-friendly budgets.
Establishment of:
- Commitment controls.
- Regular in-year budget execution reporting.
Preparation of BRA’s first-ever annual financial statements.
Completion of the first external audit in BRA’s history.
Adoption of modern procurement policies.
Introduction of competitive tendering procedures.
Creation of a government asset register.
Establishment of an internal audit function.
Improvements in revenue administration.
Expansion of on-budget revenue reporting.
Enhanced fiscal transparency through:
- Public disclosure.
- Stakeholder engagement.
Stronger participation in intergovernmental fiscal coordination mechanisms.

Results and Comparative Performance

Comparative analysis indicates significant institutional improvements across multiple PEFA performance dimensions.

Key improvements include:

Many indicators improved from PEFA "D" ratings in 2023 to "C" or "B" ratings by 2025.
Significant progress was achieved in:
- Budget classification.
- Fiscal transparency.
- In-year budget reporting.
- Annual financial statements.
- External audit.

These institutional improvements generated several positive outcomes:

Increased confidence among development partners.
Stronger financial governance.
Improved credibility of BRA’s financial management systems.

Development Partner Support

Improved Public Financial Management enabled BRA to satisfy key donor requirements.

Major achievements include:

Meeting important World Bank budget support conditions.
Meeting European Union (EU) fiscal support benchmarks.
Securing the disbursement of significant development financing.

This created a positive reform cycle:

Improved financial management.
Increased donor confidence.
Greater financial support.
Expanded investments in institutional reform and public service delivery.

Broader Implications

BRA’s experience demonstrates that meaningful Public Financial Management (PFM) reform is achievable even in fragile and post-conflict environments.

Key lessons include:

Well-sequenced reforms produce stronger outcomes.
Political commitment is essential.
Technical assistance accelerates institutional development.
External incentives can effectively support reform implementation.
Local capacity should be strengthened through practical learning and institutional experience.
Improvements in PFM should be linked directly to transparency and accountability.

Remaining Challenges

Despite substantial progress, several important challenges remain.

Priority areas include:

Strengthening the legal codification of PFM reforms.
Modernizing the Financial Management Information System (FMIS).
Improving predictability of intergovernmental fiscal transfers.
Expanding institutional capacity across all departments.
Further strengthening internal and external oversight mechanisms.

Conclusion

The Banadir Regional Administration (BRA) has transitioned from an ad hoc and largely opaque financial management system to a functioning Public Financial Management framework aligned with recognized national and international standards.

Although further reforms remain necessary, the progress achieved between 2023 and 2025 represents a major milestone toward:

Stronger local governance.
Improved fiscal discipline.
Greater transparency.
Enhanced accountability.
Better public service delivery.
Sustainable state-building in Mogadishu.

This report contributes to the growing body of evidence demonstrating that effective Public Financial Management (PFM) reform can serve as a cornerstone for recovery, institutional development, and good governance in fragile and post-conflict environments, offering valuable lessons for Somalia and other countries facing similar challenges.