Overview

  • After more than two decades of civil conflict in Somalia, a federal government emerged in Mogadishu in 2012, created with the framework of a provisional constitution. A “Somali Compact” was agreed upon by members of the international community. This comprised a two-year deal that would increasingly deliver assistance through Somali institutions.

    After a peaceful transition of political power in February 2017, the New Partnership for Somalia was drawn-up. Aligned with the National Development Plan, it outlines priority areas critical for development, including a) Humanitarian, b) Strengthening National Security, c) More Inclusive Stable Politics, and d) Accelerating Economic Recovery.

    Economic Development

    Somalia’s Gross Domestic Product (GDP) was estimated to be $6.2 billion for 2016, with 5% nominal growth. Its GDP per capita was equally low, at $450; Somalia has a poverty rate of 51%. Private consumption is GDP’s key driver, contributing 132.6% of it; in sharp contrast, investment made up only 8% of GDP in 2015. Somalia’s economy is highly dependent on imports, which account for more than 2/3 of GDP, while exports comprise just 14%, creating a large trade deficit, mainly financed by remittances and international aid.

    Remittances, estimated at $1.3 billion a year, provide resources to the national economy and a lifeline to parts of the Somali population, saving impoverished households and helping them create the slenderest of economic buffers against external economic shocks.

    Poverty is abundant in Somalia, with a half of the country’s population of about 12 million living below the international poverty line (of $1.90 a day). One in every 3 people receiving remittances is poor (35.4%). Inequality is high, driven by the difference in the incidence of poverty in different locations: it is close to 60% in Mogadishu, more than 40% in other urban settings, a little over 50% in rural areas, and much higher in IDP settlements at about 70%.

    Public expenditure has increased significantly, from $35.1 million in 2012 to $170.5 million in 2016, driven by year-on-year increases in revenue. Improvements in revenue collection mean that domestic revenue grew from $84.3 million in 2014 to $112.7 million in 2016, driven by taxes on trade. However, total revenue to GDP accounts for only 2.7% of GDP.

    In 2016, donor funding accounted for 1/3 of total revenue ($55.3 million), and domestic revenue is still insufficient to enable the government to deliver public services to its citizens. The administrative and security sectors account for 90% of total public spending, while economic and social services account for about 9%.

    Poor collection capacity, a narrow tax base, few legal and regulatory frameworks, and the government’s lack of full territorial control hinder revenue mobilization.

    Last Updated: Oct 13, 2017

  • The objective of the Somalia Interim Strategy Note FY14-16 (ISN) was to lay the foundations for Somalia to reduce poverty and achieve shared prosperity, by meeting some of the priority Peacebuilding and Statebuilding Goals contained in the then Somali Compact. The ISN was followed by a Country Partnership Framework (CPF), which had input from a Systematic Country Diagnostic (SCD) and Country Portfolio Performance Review (CPPR).

    The CPF guides the World Bank Group’s engagement with a country. In Somalia, though, the Bank still contributes to a well-coordinated, international effort, with partnerships between agencies across the interlinked areas of humanitarian, politics, security, and development.

    WBG activities are clustered around two priorities:

    • Priority One: Strengthening Core Economic Institutions
    • Priority Two: Expanding Economic Opportunity

    These are based on the Somalia Development and Reconstruction Facility (SDRF), a consultative process that allows the FGS and Federal Member States, World Bank, UN, and development partners to coordinate their support.

    The Bank uses its comparative advantage and, with its portfolio focused on recipient-executed projects (designed and delivered by Somali institutions), the World Bank acts as a vehicle for building in-country systems, ensuring ownership, and capacity internalization.

    Its program will continue to adapt, in terms of the sectors it works in and the geographical areas where it works, as well as being flexible in the modality of its engagement, depending on security, governance, and political conditions. 

    Last Updated: Oct 13, 2017

  • The World Bank program in Somalia is funded by the Multi-Partner Fund (MPF). The current MPF focuses on core state functions, socio-economic recovery, and urban development in Somalia. By adopting a phased approach to development and scaling-up, the fund adapts itself to the dynamics of Somalia’s context and responds to new opportunities and challenges, such as the 2017 drought.

    Supporting Reforms

    The MPF has made progress in engaging key government institutions to enhance their role in revenue collection and service delivery. The ‘Troika’ projects, namely the Recurrent Cost & Reform Financing (RCRF) Program, the Public Financial Management (PFM) Reform Project, and the Public Sector Capacity Injection Project (CIP), focus on core government functions and support to the Somali authorities to help them deliver services and enhance stability and growth in the country.

    Important steps have been taken in payroll reform and strengthening the Somalia Financial Management Information System (SFMIS), as well as in other budget preparation and payment systems. The Federal Government of Somalia’s (FGS’s) increased public spending illustrates the improvements in its ability for government systems to transparently manage funds.

    In parallel to process and systems reform, the MPF is engaging the government to support the development of a professional, high quality, sustainable civil service. These reforms are being rolled out at the level of the federal government and in select Federal Member States (FMS) to ensure national coverage. Federal government officials and their counterparts in state governments continue to discuss intergovernmental fiscal relations, reflecting increasingly constructive relations between the country’s federal and regional authorities.

    These positive developments informed the first Article IV Consultation by the International Monetary Fund (IMF) in two decades in July 2015, and the initiation of discussions on a potential Staff Monitored Program (SMP). In May 2017, the IMF reached an agreement with the Somali authorities for a second SMP.

    Supporting dialogue

    The MPF supports the dialogue between the public and private sectors. Recognizing that the Somali economy has reached the margins of growth in an unregulated context, MPF projects are helping the government to develop a sustainable, private sector-led economy, through the Public-Private Cooperation Agreement to Accelerate Somalia’s Economic Recovery agreed at the London Conference 2017.

    The dialogue facilitated through sector engagements in the Oil and Gas, Energy and ICT sectors are building an understanding of the benefits to the consumer and the private sector of improving the economy’s regulatory environment, as well as of the role of the federal government in supporting economic growth.

    In parallel, projects on private and financial sector development, as well as remittances, are helping to build systems for improving access to finance: a key constraint to growth. The Somali Core Economic Institutions and Opportunities Program (SCORE) is an investment designed to improve the environment for private and financial sector development, and catalyze private investment and job creation. The Project to Support Remittance Flows to Somalia (SRFS) works alongside the Central Bank of Somalia (CBS) to implement a number of activities aimed at tackling key deficiencies affecting the resilience of the remittance market in Somalia until a sounder financial system is in place.

    The World Bank is supporting the Ministry of Finance in facilitating policy dialogue to strengthen transparency and accountability in strategic public procurement and concessions, asset recovery, and other selected areas of financial governance.

    The MPF pipeline has also served as a platform for catalyzing engagement by the International Finance Corporation (IFC) in Somalia. The IFC recently set up a Trust Fund to leverage private capital for further reforms.

    Supporting the evidence base

    In a context defined by the absence of credible data and information, the MPF portfolio is helping fill knowledge gaps for evidence-based decision making in targeted sectors. This includes, for example, mapping wind patterns to help inform investment in the energy sector; benchmarking regional salary scales for civil servants; analyzing the Somali mobile money ecosystem to pilot a government platform for bulk payments; and analyzing the telecommunications spectrum to provide information for the more optimal allocation of frequencies.

    The Bank also does periodic analyses of poverty in Somalia through the High-Frequency Survey methodology, as well as the twice yearly, Somalia Economic Update series.

    Lastly, the World Bank is collaborating with the UN to produce analytical work on the Use of Country Systems (UCS), aid flow analysis, and Security and Justice Public Expenditure Review.

    Moving forward, analytical work and data collection will be enhanced under the MPF to provide better information for decision making within the government and amongst development partners. Examples include the upcoming Post-Disaster Needs Assessment and Country Economic Memorandum on agriculture.

    Last Updated: Oct 13, 2017

  • The World Bank Somalia portfolio is supported by two trust funds, the Somalia Multi-Partner Fund, a $312 million Multi Donor Trust Fund activated in August 2014, and the State- and Peace-Building Fund (SPF), which has contributed $36 million to Somalia since 2012.

    The MPF is supported by the European Union, United Kingdom, Sweden, Norway, Denmark, Switzerland, Finland, United States, Italy, and the World Bank’s SPF.

    Last Updated: Oct 13, 2017

Api


LENDING

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

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

Nairobi, Kenya
Hugh Riddell
Country Representative
Delta Center
Menengai Road, Upper Hill
PO Box 30577-00100
Nairobi, Kenya
+254-20-293-6061
hriddell@worldbank.org
Washington
Preeti Arora
Country Program Coordinator
1818 H Street NW
Washington, DC 20433
+1-202-458-4097
parora@worldbank.org