RECURRENT COST & REFORM FINANCING (RCRF) PROGRAM – Phase II

Sector Context: Since RCRF I, important political and state building milestones have been met in the state formation process that alter the context for RCRF II. The elements of Somalia’s future federation are emerging and there is an increasing strategic importance to ensure emerging and established federal member states are part of the broader fiscal and administrative discussions. This emerging sub-national environment is a new and important factor in the context for development assistance in Somalia and specifically for RCRF II. Regions and federal member states have been engaged with RCRF II on the basis of a series of ‘Readiness Criteria’ before they will be eligible to receive financing, as set out under Component 2. The readiness criteria will cover 3 major areas: strategic; macro-fiscal; and PFM/Administration.  Meeting the criteria is an essential pre-condition for governments to access RCRF II financing, and in subsequent years will be followed by an ongoing process of routine monitoring against an agreed set of benchmarks. 

Timeframe 2015-19

Financials Appraised Value: US$ 144 m

Grant Agreement: US$ 24 m  

Components Phase II, starting in 2015, will consolidate the gains made under Phase I, and will strengthen macro-fiscal management, Central Bank reform, and potential targeted support to expanded social service delivery. Phase II will also explore options for the expansion of recurrent cost support to regional governments. 

Component 1: Support to Core Government Functions in MDAs in FGS

  • Finance the salaries of eligible non-security sector civil servants in the MDAs; the cost of staff injected under the capacity injection mechanism (CIM); and non-salary operating costs for MDAs.

Component 2: Inter-Governmental Fiscal Transfers for Core Functions (Grants from FGS to Sub-National Regional authorities)

  • RCRF sub-national financing will reward accountable and transparent government in line with RCRF broader principles. Interim and emerging states will need to comply with clearly defined ‘Readiness Criteria’ before receiving financing. These criteria are currently under discussion and consultation, and will cover the following dimensions: (a) macro-fiscal, including fiscal assessments; (b) PFM; (c) public administration; and, (d) social service delivery impact.

Component 3: Support of recurrent costs in Health and Education Sectors in FGS and eligible sub-national authorities

  • Support the FGS, Puntland and Interim Jubbaland Administration (IJA) to expand their service delivery systems through improvement of accountability systems and support of recurrent costs in the education and health sectors. The specific activities include financing: (i) the set-up of basic accountability systems in both sectors; (ii) eligible salaries and allowances for teachers and health workers from 2015 to 2020; and, (iii) eligible non-salary recurrent costs in the sectors.

Component 4: Project Management and Coordination: Includes EAFS consultants; workshops, seminars, training, travel, communications, translation of documents, operational expenses, bank charges, etc.

  • Support coordination, administration, communication, management, procurement, monitoring and evaluation (M&E) as well as impact-evaluation, auditing and dissemination of project activities in FGS, Puntland and the IJA.  It finances dedicated staff to cover administration, financial management, procurement and communications.  It also supports efforts to develop and strengthen the Fiduciary Sections of the Offices of Accountant General in FGS, Puntland, IJA and interim and emerging states through the financing of equipment, furniture and fillings, capacity building, technical assistance, and other inputs as required. The project also supports the Offices of the respective Auditor Generals with technical assistance to provide annual audits and the Central Bank of Somalia with technical assistance to strengthen the payments systems.

Beneficiaries Main beneficiaries: (a) the government, civil servants and employees of the implementing Ministries, Departments and Agencies in FGS, Puntland, Interim Jubba Administration (IJA), and other emerging states; (b) social service workers-- i.e., teachers and health workers in FGS, Puntland, IJA and other emerging states; (c) development partners who use the RCRF as a convening platform to provide technical advice and financial assistance. 

Government Counterparts Ministries of Finance, Office of the Accountant General

Implementation Arrangements Recipient Executed (RE)

Geographic Coverage In addition to support at the level of the FGS in Mogadishu, two regions have achieved a level of readiness for RCRF Phase II project support: Puntland and IJA.