By Yara Bayoumy
MOGADISHU (Reuters) - Somalia's president dismissed a U.N. report that accused senior leaders of corruption and defended his record as he campaigned for re-election in a landmark vote.
Sheikh Sharif Ahmed, who took over as head of a Western-backed transitional government in 2009, also promised he would step down if he lost - in an apparent answer to some critics who are concerned he could be planning to cling on to power.
Mired in conflict for more than two decades, the Horn of Africa state is on the cusp of a presidential election that will end a succession of United Nations-backed transitional governments, in place since 2004.
Western and regional states have pumped in millions of dollars in aid, and sent African troops to help crush al Qaeda-affiliated militants.
But the United Nations' Somalia monitoring group in July said it had found that, out of every $10 received by the transitional federal government (TFG) between 2009-2010, $7 never made into the state's coffers.
"We regret this report. It is a fabricated report and a lie. Those people who compiled it are intent for Somalia to stay as it is," Ahmed told Reuters on Thursday in the plush garden of Villa Somalia, his official residence in Mogadishu.
"If money had been seized, Somalia would never have reached the stage it has today," Ahmed said, citing progress in security conditions.
Ahmed, the current prime minister and parliament speaker are all contesting the election due to take place on or around August 20, the end of the TFG's mandate.
Under a complex procedure, tribal alders are in the process of nominating members of a new parliament. Those parliamentarians, once vetted by a committee, will then vote for the president who will start a four-year term.
While donors are frustrated by the widespread graft, they are unlikely to wash their hands of the largely lawless country seen as a fertile breeding ground for Islamist militants.
Decades of fighting and a series of droughts have also left millions homeless and in need of food aid.
The U.N. report said that in 2011 almost a quarter of the government's total expenditure - more than $12 million - was absorbed by the offices of the three top leaders.
"It is clear from the Monitoring Group's investigations that the political will to enact ... reform is lacking in the highest echelons of government," the report said.
Ahmed denied that funds had been misappropriated, saying they had been spent to lift Somalia out of its interminable state of crisis.
Privately though, Somalia-focused diplomats in Nairobi say Ahmed, a former leader of an Islamist rebel group, has failed to deliver on security gains and basic public services.
International observers say it is too difficult to predict who will win the election in a country where clan politics, rather than political qualifications, often determine an individual's political future.
Ahmed, whose mandate was supposed to end in 2011 before being extended by another year, said he had no intention of holding onto power.
"We are ready to accept the outcome, whatever it is," he told Reuters.
(Editing by Richard Lough and Andrew Heavens)