Here is the rewritten article in markdown format:

Somalia’s Fiscal Risks: A Call for Improved Management

In Somalia, fiscal risks have become a major concern, threatening to derail the country’s fragile economy. The collapse of the republic in 1991 has led to a loss of institutional capacity and poor management practices, making it challenging for the government to manage public finances effectively.

Policy Constraints

The lack of institutional capacity and economic fragility has exacerbated policy constraints across all spheres of governance. The federal government and five member states (including Puntland) are grappling with fiscal risks that can have far-reaching consequences, including increased debt levels and prolonged fiscal crises.

Types of Fiscal Risk

Experts identify three types of fiscal risk:

• Macroeconomic Risks: Arising from errors in forecasting and their impact on the budget. The federal government and member states face significant challenges, including balance of payments deficits linked to dollarization, currency outflows, and limited capacity to control inflation due to high dependency on foreign commodities.
• Institutional Risks: Related to the ministry of finance’s approaches to risk management, policy formulation, and institutional capacity. Fiscal risk management practices across different levels of government in Somalia remain unconventional, with fiscal policy frameworks, formulation tools, and forecasting methods lacking a strategic approach.
• Specific Risks: Occurring as unexpected events such as droughts, floods, or desert locusts impact the country, resulting in costs borne by the federal government or member states. Additionally, high uncertainty surrounding grants from international development organizations and financial transfers from the federal government to member states can lead to large revenue shortfalls, unplanned increases in debt levels, and potentially a collapse of fiscal policy.

Mitigating Fiscal Risks

To mitigate these risks, experts recommend the following actions:

• Creation of a Macro-Fiscal Unit/Department: To promote macro-fiscal objectives and recognize fiscal risks.
• Strengthening Institutional Arrangements and Capacity: By reshaping organizational design, creating information flows across departments, and developing personnel capacity.
• Establishing Common Systems and Standards of Public Financial Management: Across all levels of government to cover the budget cycle.

By implementing these measures, Somalia’s institutions can better manage fiscal risks and improve overall fiscal performance.