Oil to cash in Somaliland: A debate whose time has come

Abstract

Somaliland might start producing oil in 2019. Yet, it has done little to prepare for the arrival of oil revenues which could exceed its current annual budget. Although Somaliland has been largely peaceful for two decades and recently inaugurated its fifth president after holding a democratic election, it remains entirely unrecognised. Oil revenues could positively transform Somaliland's fragile political economy, but they also place it at significant risk for a political resource curse that could threaten its democracy, peace and political institutions. Oil to cash or the direct distribution of oil revenues to citizens has been posited as a solution to the political resource curse. Somaliland has many of the elements necessary to make oil to cash work in place. Several factors combine to make Somaliland both potentially receptive to oil to cash and uniquely positioned to benefit from it. Interviews with political elites demonstrate receptiveness to the idea. Sample revenue calculations from other African oil producers highlight just how such a system could work to benefit Somaliland.