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Enhancing the financial position of cities : Evidence from Hargeisa

Case study 4
Financing Sustainable Urban Development
University of Oxford

9 mai 2023

The City of Hargeisa, despite being in the very early stages of enhancing its financial position, has achieved significant reform in just a few years since its democratic establishment in 2002. The successes achieved are even more remarkable, considering the fragile context of Somaliland after 30 years of civil war within Somalia, which left widespread destruction and devastation in the city. This is compounded by Somaliland’s lack of recognition as a sovereign state by the international community. The case provides an illustrative example of leveraging urbanisation to raise municipal revenues for public service delivery, and in building local government legitimacy to better deliver to the populace.

Given the context, the reforms are those that are easy to implement and effective, including the application of a simple digitised accounting and billing system, and a fit-for-purpose areabased property tax system. Where other cities have struggled to service more people with a stagnant revenue base, Hargeisa’s reforms have meant that population growth has resulted in increased revenues from property taxes and daily vendor collections. At the same time, private contributions of land on the peri-urban fringes offer an opportunity for in-kind land value capture and planned development in the future. Their successes are reinforced by the legitimacy built through participatory governance, which demonstrates what is achievable when communities, local government and the private sector work together.

While Hargeisa has made progress on the basics of own-source revenue, much more is yet to be done to finance future development. Local government capital expenditure, for instance, is often far below what is budgeted. This is influenced by public demand for current and visible service delivery over and above less visible long-term investments. Furthermore, due to Somaliland’s internationally unrecognised status as an independent country, Hargeisa received limited development assistance when compared to other cities in similar contexts.
However, a small coordinated effort through a coalition of UN agencies has fundamentally shaped some of the city’s reforms. As the country begins to formalise its financial sector, opening up to commercial banking and international investment, development support will be needed to ensure local governments and the private sector are able to capitalise on the opportunities this presents.

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