Health Care, Lending Institutions and Human Capital

Abstract

International lending institutions like World Bank and IMF have played a significant role in ensuring the economic development gap between developing and developed countries has reduced growth radically. Although supporting developing countries through donor funding especially in Africa has necessitated social, economic and political development, the case has not always been the same across the board. A case scenario of Somalia the war-torn country at the horn of Africa is a prime example of how donor funding has failed to accomplish its purpose. Somalia has been at war for over 20 years, the country’s’ people have been locked in a civil war that has brought the country to its knees economically and politically. The World Bank and International Monetary Fund (IMF) have been at the forefront in donor funding for Somalia which in recent times has been trying to rebuild its economy but overall the funds have been heavily mismanaged by individuals. Ultimately, this paper seeks to establish that indeed funding from international lending institutions has hindered the social economic and political development of Somalia.

            Key words: Somalia, foreign aid, World Bank, IMF, health care

Explore whether or not funding from international lending institutions like World Bank and IMF are helping or hindering the social economic or political development of Somalia, support your response with examples

Somalia is an African nation founded in 1960, it started off as one of the poorest nation in the world, 55 years later as a republic state the country still struggles due to internal power wrangles orchestrated by repetitive coups. To help in rebuilding the war-torn country, World Bank and the US Stated department have remitted an estimated total of over $2 billion every year making it the most foreign aid-dependent country in the world. Since 1962 Somalia has been a member state of the International Monetary Fund (IMF) and as the most remittance-dependent state in the world, the nation has an accumulated debt of $352 owed to the foreign aid body a debt it has to repay before it can receive further lending (Maimbo, 2011).

It is evident that foreign aid has not changed the economy of Somalia and other developing nations in Africa. Donor funding from the west has gone to waste under different leadership regimes in Somalia, the country is still underdeveloped after years of receiving foreign aid. As of 2012, a pattern of mismanagement had been recorded in Somalia, it was reported that in the period between 2009 and 2010 the transitional administration of government had mismanaged over $130 million (Fortin, 2012). According to Pambazuka News, only $124 million of the domestic and bilateral funding could be accounted for by successive governments, almost one-third of donor funding (Pambazuka News, 2012).

A UN Monitoring group in 2012 revealed that Somalia had systematically been neglecting a mechanism put in place by Price Waterhouse Coopers as a confidence building rule (Pambazuka News, 2012). The report stated that an underlying problem was that the Somalia governments’ weakness and imminent collapse have always been marketed by the transitional administration to lure international lending institutions. The report also revealed that once the funds were disbursed fraud, embezzlement and corruption prevailed, with 80% of the money withdrawn from country’s reserves going to fund private projects. The report further indicated that apart from fraud being a manifestation of mismanagement it was the system of administration (Pambazuka News, 2012).

It is almost impossible for the Somalia government to get back on the track of development when 70% of its budget is funded by foreign aid, which means the country will always be settling debts it owes to the numerous foreign bodies. The ever flowing donor funds have created a dependency culture that challenges the possibilities of development going forward since the excessive levels of aid diminish the element of governance.

Discuss with examples at least 4 substantive ways in which a healthy population strengthens the economy of Somalia

For over two decades the health care infrastructure in Somalia has been in a state of collapse, the population has been heavily dependent on foreign aid to access primary medical care. A report by World Health Organization states that 94% of Somalia’s health budget was funded by international aid donors, the rebuilding of hospital infrastructure and recruitment of doctors. The move to rebuild is necessary since a sick population cannot work to support the economy, there is a new vision set in motion by the current government to make primary health care accessible to every Somali citizen (Nairobi, 2013). Ultimately, the state of a country’s economy significantly depends on the health of its population, for Somalia to develop it will have to put its act together to revamp its health care system.

It is evident that a healthier population is always at work, Somalia’s Gross Domestic Product (GDP) is reliant on the livestock industry which is the main source of income for most of the people in the country. Livestock and the by product from the industry account for at least 40% of the country’s GDP with 80% of the total exports of the country a product of the livestock industry. For the people running this industry to keep it productive, they must be healthy, the livestock industry is mostly laborious and requires physical strength thus making it vital for one to be healthy to ensure they keep the economy and the country’s GDP growing.

Due to the constrained health care system, the mortality rate among infants has been on the rise in Somalia, deaths related to pregnancy complications have also been high. The level of education for family planning among women is very low, access to family planning and contraceptives has been a challenge. Access to health will help families to gain knowledge and enable children to stay in school to get a formal education without interruptions. It is evident that education is the key to development if the children can learn and have successful careers they, in turn, get a stable income which supports the microeconomic level of the economy ("UNICEF Somalia - Health - Priority issues," n.d.).

The healthier the population the more successful and productive it gets. In Africa educating a woman is an empowerment to the community and society at large, educated women get to work instead of staying at home to raise children which are a plus to family planning. Family planning reduces the need for foreign aid to cater for health care and basic resources thus allowing for the allocation of resources to far more needful areas like security (Nairobi, 2013). Lastly, he security of Somalia has been frail for decades and given the level of health which is low, it is safe to say that a healthy population will go a long way in joining the forces of the country to defend its borders.

Ascertain the degree to which the leadership of Somalia has used foreign aid to improve its health care system support with examples

            Unfortunately, the governance in Somalia has failed to use foreign aid effectively to improve its health care system. Corruption still thrives in government institutions, the Somalia government has been consistently accused of non-disclosure of financial expenditure, lack of transparency and inefficient accounting systems. It is evident that most of the foreign aid received in Somalia was channeled to private official’s accounts instead of completing designated projects (Voice of America, 2012). 

            An audit report by the Transitional government, 2011 revealed that there is a lack of integrity and expertise among the officials of the government that can necessitate the achievement of the set financial goals. The government officials that handled donor funds in Somalia had personal interests thus frustrating the proper use of monetary aid. However, all hope is not lost as findings have revealed that if Somalia can develop a functional financial infrastructure the country will be able to manage monetary aid (Maimbo, 2011).

References

Maimbo S. 2011. Remittances and Economic Development in Somalia: An Overview. The World Bank: Washington, DC.

Pambazuka News. 2012. New Report Reveals Somalia's Missing Millions, viewed October, 2015,www.pambazuka.org/en/category/features/83908/print

Transitional Federal Government. 2011. Public Finance Management Unit (2009–2010). Transitional Federal Government: Mogadishu.

Voice of America. 2012. Content Report: Somalia has not Accounted for Majority of Funds, viewed 2 October, 2015, http://www.voanews.com/content/report-somalia-has-not-accounted-for-majority-of-funds/1145803.html

UNICEF Somalia - Health - Priority issues. (n.d.). Retrieved from http://www.unicef.org/somalia/health_90.html

Nairobi. (2013, February 22). IRIN Africa | New plan to ensure universal healthcare in Somalia | Somalia | Governance | Health & Nutrition | Security. Retrieved from http://www.irinnews.org/report/97709/new-plan-to-ensure-universal-healthcare-in-somali