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Somalia Overview

History

Somalia has historically been divided into three heterogeneous regions - Somaliland, Puntland and South Central Somalia - with a history of internecine violence. Following the collapse of the Siad Barre regime (1969-91) the country descended into civil conflict with devastating results: gross domestic product (GDP) per capita and human development outcomes are now among the lowest in the world.

Now, following a fragile, but positive, transition mid-2012, Somalia has a full federal government in Mogadishu committed to inclusiveness, reconciliation and peace, based on a provisional constitution. Many observers hail the transition as a genuine break with the past, and the best opportunity for stability the fragmented country has had in the last two decades. The New Deal for Somalia Conference held in Brussels in September 2013, is a key milestone for the country and for a more sustainable and committed international re-engagement with Somalia.

Social Development

The state’s collapse undermined basic service delivery, with a severe impact on human development outcomes. Out of 170 countries, Somalia is among the five least developed as measured by the 2012 Human Development Index. The pre-eminence of customary clan-based systems inhibit social cohesion and pervasive traditional practices such as polygamy, early and forced marriage, exclusion of women from education and employment opportunities, result in some of the worst gender equality indicators in the world.

With more than 70% of the population under the age of 30, Somalia is a young country with enormous development needs. Among the more urgent is food security which, together with displacement of a large share of the population, has led to a continuing humanitarian crisis that has spilled over into the wider region.

Economic Development

Somalia’s economy has been shaped and sustained by conflict. The 2012 Human Development Report estimates per capita GDP at US$284 - against a sub-Saharan Africa average of US$1,300 per capita. External aid (mostly humanitarian) and remittances are the key sources of income – but are not sustainable or translated into development efforts.

Official development assistance (ODA) per capita is US$75 (including both humanitarian and development assistance) which is double the average of US$36 per capita for fragile states. The other main source of revenue is remittances estimated at US$1 billion (US$110 per capita) which makes up 35% of GDP - the highest worldwide.

The unregulated state of the economy has allowed the private sector to grow although this is marred by elite capture of revenue sources, often by cartels linked to militias. Somalia has, for instance, received between US$304-317 in illicit gains from piracy since the first known hijacking in 2005, although it is not known how much has remained in country.

Livestock is the mainstay of the economy and is estimated to create about 60 percent of Somalia’s job opportunities and 40% of its GDP. The export of livestock and meat generates 80% of foreign currency.

The self-governing regions of Somaliland and Puntland have managed to develop basic processes and structures of public administration. In Somaliland, domestic revenue was successfully doubled in 2011 though in Puntland tax administration and enforcement remains nascent.

Education

The disappearance of formal education systems has lowered the national enrolment rate to around 31% (22% for girls as compared with 34% for boys). Secondary school participation is even lower for both boys and girls, with net attendance ratios of 12% and 8% respectively. Barriers to education include limited or unavailable primary and secondary school facilities, prohibitive school fees, and conflicting household and livelihood demands. Girls, in particular, are less likely to attend school due to domestic responsibilities. Nearly 75% of females between 15-24 years are illiterate, one of the world’s highest levels of gender disparity.

Health

Access to health services is poor even by Sub-Saharan standards. Life expectancy at birth is 51 years and infant mortality rates are estimated to be 108 deaths per 1,000 live births i.e. one in every ten children dies in the first year (UNICEF).

 In 2009, there were an estimated 625 health posts and 225 maternal and child health centers in Somalia. Assuming a population of nine million, this amounts to just one health post per 15,200 people. What existing services exist, are provided by the private sector, including pharmacies and drug stores, which may account for high service fees.

Political Development

In August 2012 the Federal Government of Somalia (FGS) was brought to power with a four-year term under a provisional constitution approved by a new parliament – ending Somalia’s long period of revolving transitional government at the federal level. Since its establishment, the FGS has emphasized improved governance and economic management as key pillars of its development plan and is also laying the foundations for the implementation of a federal system of governance. The new government is responsible for meeting important political, security and economic milestones during its term, including the passage of a permanent constitution and the preparation for national elections in 2016. Regional countries and international actors have re-doubled efforts to support and sustain this window of opportunity, endorsing a New Deal for Somalia at the September 2013 Brussels Conference and pledging US$2.4 billion against the Somali Compact, which includes a “Special Arrangement for Somaliland”. A Special Financing Facility (SFF), developed by Norway with World Bank support, has been put in place to finance critical expenditure in the first phase of the transition. 

Last Updated: Apr 07, 2014

Introduction

The World Bank’s engagement is evolving rapidly and remains flexible in the face of a consistently challenging security context, especially in southern Somalia. Nevertheless, since preliminary re-engagement in 2003, the Bank has played an important role in framing international engagement through co-leadership of the 2006 Joint Needs Assessment underpinning the 2007 Reconstruction and Development Program for Somalia. More recently, and especially since the transition towards full federal government under a provisional constitution in 2012, the Bank has supported the Somalia New Deal process, including the elaboration of a Somali Compact agreed at the Brussels Conference in September 2013, and the establishment of a Somalia Development and Reconstruction Facility (SDRF) for delivery and coordination.

Currently active mainly in the northern autonomous region of Somaliland, the Bank’s $33.7 million operations portfolio includes the second phase of a $20 million private sector development project, and the Somalia Knowledge and Political Economy project which includes a large number of analytical projects on various sectors of the economy. More recently, the Bank has approved a $4.5 million State and Peacebuilding Fund grant to install and strengthen core public finance management systems in the Mogadishu Ministry of Finance.

The FY 08-09 Interim Strategy

The FY 08-09 ISN was developed in response to the Reconstruction and Development Program, with a proposed envelope of $6.5 million to deliver support in four areas: accountability and PFM, decentralized service delivery and community-based work, the business enabling environment, and economic analysis. Based on the ISN, the Bank developed a set of activities, with funding from internal Bank trust funds. Given the evolving security and political environment the ISN objectives were delivered mainly in the more permissive north, however some activities were delivered directly by non-governmental organizations (NGOs) in southern regions.

Working in partnerships with technical agencies, the Bank also demonstrated responsiveness to urgent needs. Most critically in 2011, the Bank and the Food and Agriculture Organization (FAO) designed and delivered a rapid response to the drought, funded by the Global Fund for Disaster Risk Reduction (GFDRR) and the SPF, that was able to build on and scale up existing FAO operations for drought resilience at the community level in southern Somalia. The Tsunami Livelihood Recovery Project – also delivered in partnership with FAO – supported fishing communities in Puntland impacted by the 2004 tsunami, providing capacity and equipment and resulting in income increases of around 20-30%. Through this work and the Puntland Fisheries project (funded by the Japanese Fund for Social Development), the Bank and FAO have established a strong partnership which will be developed further during the ISN period.

The Bank’s new Strategy for Somalia

In light of the new context in Somalia, the World Bank Board approved in December 2013 the new FY14-15 Interim Strategy and Multi-Partner Fund, setting out a plan for scaling up World Bank operations to support the Somali transition. In line with the Compact, the new Strategy will support two strategic and long-term objectives: strengthening core economic institutions and expanding economic opportunity. The Multi-Partner Fund (MPF) will provide coherent and coordinated funding for government-led initiatives to achieve these objectives. The priorities will be to ensure robust public finance management and financial governance and to re-build the country’s statistical and knowledge basis. The Bank will also work on stimulating private sector investment for employment and growth and will initiate national programs in urban infrastructure and some productive sectors

Last Updated: Apr 07, 2014

Work carried out under the World Interim Strategy achieved some important results:

  • The Bank established a trust-funded analytic program that continues to be the main platform for knowledge generation today. The US$2 million Somalia Knowledge and Political Economy project (SKOPE) funded by the State- and Peace-Building Fund (SPF) focuses on core economic data and political economy analysis. In Somaliland, the Bank has maintained an intensive policy dialogue with the authorities through the SKOPE-financed household survey, a public expenditure review, and the process of building a set of national accounts. In 2011, SKOPE commissioned a Financial Diagnostic Assessment (FDA) of a Somali whistleblower’s account of financial mismanagement inside the former TFG government. A public summary of the FDA was picked up in the news media and in the UN’s Monitoring Group report for 2012, and strengthened both Somali and international resolve to tackle public finance management under the new government. More recently, SKOPE has facilitated the Bank’s support to the Economic Recovery Plan and debt data reconstruction. 
  • The Bank’s engagement with the private sector – developed and delivered in partnership with the IFC – is the largest in the portfolio. The Somalia Private Sector Re-engagement project (SOM-PREP), a private sector development platform financed by the SPF, Danida and DFID, is in its second phase. Active only in Somaliland to date, the project has a programmatic approach allowing for flexible and adaptive work, based on requests from government and covers investment climate and regulatory reforms, PPPs in the ports and waste management sectors, and banking supervision. The project also engages at firm level through value chain work and has established the Somaliland Business Fund, a matching grant window to support enterprise development. The SBF has now awarded US$4.6 million in grants to 80 small and large investment projects, crowding in total private investments exceeding US$10 million and generating an expected 1,500 additional jobs.
  • The Bank’s Community Driven Recovery and Development project (CDRD) was developed in partnership between the Bank and donors. Although the Bank stopped its funding in 2010, the project remains active across Somalia as a platform for bottom-up delivery of community-based support delivered by NGOs.
  • With funding from the LICUS (Low-Income Under Stress) Trust Fund, the Bank stayed engaged in Public Finance Management, focused mainly on the legal framework in Somaliland. Since the transition, this earlier engagement has allowed the Bank to step up rapidly and support the FGS to establish PFM credibility through a self-assessment process and the auditing of the 2012 financial statements, both key signals of commitment.

Last Updated: Apr 07, 2014

LENDING

Somalia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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