The World Bank in Somalia

Somalia is continuing to make progress towards reaching the Heavily Indebted Poor Countries (HIPC) Initiative Completion Point by end of the calendar year 2023, following re-engagement with the International Development Association (IDA) and the clearance of arrears to International Financial Institutions. Currently, Somalia is in the HIPC interim period and all HIPC Completion Point legislative reforms have passed through both houses of Parliament and negotiations with creditors are in the process of being concluded. The International Monetary Fund (IMF) concluded their 6^th review of the Extended Credit Facility (ECF) program from September 11 - 21, 2023 jointly with discussions on a new IMF-supported Program, this is the last review ahead of the Completion Point (CP). On reaching the (CP), Somalia will qualify for full and irrevocable debt relief, which could reduce the debt-to-GDP ratio from 41% in 2022 to 6%, meaning that debt is sustainable in a forward-looking sense, contingent on the full delivery of HIPC, Multilateral Debt Relief Initiative, and beyond-HIPC assistance. Somalia must continue maintaining macroeconomic stability, come to an agreement with all creditors, and must implement its ninth National Development Plan (NDP9).

Political relations in the region are experiencing dynamic change, with new opportunities for Somalia to benefit from trade and regional integration as it prepares to become the eighth member of the East African Community. As Somalia moves out of fragility, it needs to gradually transition from relying on humanitarian aid to sustainable development approaches.

Throughout 2022, and for five consecutive seasons, poor rains put the country in severe drought conditions surpassing the 2010–2011 and 2016–2017 droughts in terms of duration, severity, and scale. The number of people suffering from food insecurity and needing humanitarian assistance grew to 8.3 million people in the country (over 50%) and displaced over 2 million people from their homes in search of water, food, and pasture. Grants including social safety net programs (mainly targeted to rural poor/vulnerable households) and remittances are helping to mitigate the humanitarian crisis. In 2022, partners mobilized more than $1.5 billion in relief. 

Economic Development 

As Somalia continues to rebuild economic governance institutions, it has several opportunities—rapid urbanization, the growing use of digital technologies, planned investments in energy, ports, education, and health—so building resilience to shocks is a priority to support economic growth and job creation. However, severe drought, rising food prices, falling exports, and slowing growth in remittances are preventing the economy from sustaining a modest rebound.

Amid repeated shocks, growth in GDP averaged only 2% from 2013 to 2020. Owing to the multiple crises, GDP contracted by 0.2% in 2020. GDP growth recovered to 2.9% in 2021 but is projected to have fallen to 1.7% in 2022 under the regional drought and worsening global economic conditions. GDP growth is forecast to rebound to 2.8% in 2023 and 3.7% in 2024.

Implementing reforms that can support Somalia in reaching the HIPC Completion Point will be critical for rebuilding human capital, strengthening institutions, and fostering an environment for inclusive, private-sector-led growth.

Last Updated: Sep 19, 2023

The World Bank Group (WBG) continues to contribute to a well-coordinated international effort to support Somalia, allowing access to increased International Development Association (IDA) financing to deepen state and institution-building, and to support relief and resilient recovery from recent crises. Important economic reform documents have been finalized with WBG support, including the Somalia Inclusive Growth Development Financing Series which supports improved fiscal management, resilience, and private sector growth.

The World Bank Group Country Partnership Framework (CPF) for FY19-22 was extended by a year and adjusted to accommodate scaled-up IDA assistance and enhanced support for the institution-building and service delivery critical to strengthening the social contract. Other support for green, resilient, and inclusive recoveries from all the recent crises includes a closer focus on human capital and foundational infrastructure. A new CPF for FY24 - 29 is under preparation (expected delivery in FY24). CPF priorities will be based on the analysis of Somalia’s overall development challenges, as outlined in the FY23 Systematic Country Diagnostic (SCD) Update, the Somalia Risk and Resilience Assessment (RRA), and Somalia’s Ninth National Development Plan (NDP9) 2020-24.  It will also draw on consultations with the government, public and private sectors, civil society, marginalized groups, and development partners, considering the areas in which the WBG has a comparative advantage. 

WBG activities are clustered around three focus areas:

1.     Strengthening Institutions and Financing for Social Service Delivery 

2.     Enabling Inclusive Private Sector Growth 

3.     Strengthening Resilience 

Support has focused on helping scale up government financing in the short- and medium-term, and accompanying this with supplemental, budgetary support.

Recently approved projects include:

The Somalia Second Inclusive Growth Development Policy Financing (DPF) ($75 million) – The objective is to promote inclusive growth by strengthening intergovernmental fiscal relations and transparency as well as enhancing economic resilience and investment. The operation supports critical elements of the NDP9 as well as the government’s efforts to reach its key priority, the heavily indebted poor country (HIPC) completion point.

Somalia Enhancing Public Resource Management Project ($60 million) - The objective of this project is to strengthen accountability, transparency, and institutional capacity in public resource management.

Barwaaqo - Somalia Water for Rural Resilience Project ($70 million) - The objective is to develop water, agriculture, and environmental services for rural communities in Somalia’s drylands.

For FY24 the pipeline of projects prioritizes energy investments, fisheries, and currency/financial inclusion investments as well as other important projects such as the recurrent cost and reform financing operations and Crisis Response Window resources for additional financing of the safety nets project.

Last Updated: Sep 19, 2023

The World Bank’s International Development Association (IDA) program in Somalia, co-financed by the Multi-Partner Fund (MPF), has a total active Bank portfolio of $2.197billion comprising 17 national projects and 5 regional projects including:

Recurrent Cost and Reform Financing (RCRF) Project: The project has enhanced focus on intergovernmental fiscal federalism, citizen engagement, and service delivery, and introduced reform benchmarks for improved governance and service delivery at the Federal Member State (FMS) level - Hirshabelle, Galmudug, Jubbaland and South-West states. The project has strengthened state presence through establishing predictable, timely, and accountable payment of civil servants, teachers, and female health workers’ salaries across the FGS and the FMS. Key policy reforms for state building have also been implemented through performance-based conditions and participation eligibility criteria. The project additionally supported intergovernmental dialogue to reach constitutional settlement through technical and policy discussions at the Intergovernmental Fiscal Forum’s (IGFF) technical committees and finance ministers’ forums.

Somalia Urban Resilience Project (SURP) I and SURP II:  Phase II builds on the completed SURP I and Somali Urban Investment Planning Project by strengthening public service delivery capacity and increasing access to climate-resilient urban infrastructure in all FMS except Somaliland. The project is the first Bank project to channel the funds down to the municipal level to strengthen the country’s systems for fiscal decentralization. The project includes technical assistance on urban governance and services, upgrading of informal settlements, infrastructure operation and maintenance, and citywide flood risk assessment. To assist in drought mitigation, the project triggered a $20 million Contingency Emergency Response Component activation to support key cities experiencing large inflows of internally displaced persons.

The Somali Capacity and Advancement, Livelihoods and Entrepreneurship Through Digital Uplift (SCALED-UP) Project established the Medium, Small, and Micro Enterprise Financing Facility “Gargaara”. This increased access to basic digital financial and government services targeting entrepreneurship and employment, particularly for women. Financing under the Gargaara MSME Financing Facility reached $5.6 million by the end of September 2022. The project also launched the Somalia Online Business Licensing and Registration System (BLRS), publishing the first National Risk Assessment (NRA) on Money Laundering/Terrorism Funding, and supported strong reform momentum of the Central Bank of Somalia. The Federal Government of Somalia adopted a Digital ID Policy followed by the establishment of the National Identification and Registration Authority (NIRA) and support for the development and passage of critical laws (e.g., the National ID and Data Protection Laws). The National ID system was launched in September 2023 with a scalable program that initially will register about 3 million Somalis, half of them women. Several other launches have taken place including the Online Business Registration and Licensing System (BRLS) that is digitizing business licensing and registration and the Electronic Management Information Systems for Office of the Accountant General (OAG) which is a critical step in digitizing document and cash management and enabling secure and transparent government-to-person (G2P) and government-to-business (G2B) digital transactions.

The Somalia Water for Agro-pastoral Productivity and Resilience or “Biyoole” Project set the foundation for the provision of water to agro-pastoral communities in Somalia creating new water access points and constructing and/or rehabilitating others, improving access to water for 322,515 people, exceeding the set target of 250,000. When the first signs of drought started emerging, the project fast-tracked rehabilitation of boreholes to support drought efforts. Biyoole is also the first IDA project in Somaliland. The project supported several trainings, and exposure- and experience-sharing visits. The project has also delivered veterinary clinics, providing extensive services to the pastoral community.

The Somalia Shock Responsive Safety Net for Human Capital Project (SNHCP) supported the operationalization of the National Social Protection Policy through the government-led national shock responsive social protection system in Somalia, known as “Baxnaano” with a focus on enhancing cash transfer (CT) linkages with the health and education sectors for enhanced human development outcomes. The SNHCP provides predictable and reliable cash assistance to poor and vulnerable households and has scaled up emergency cash transfer top-ups to impacted households in response to the ongoing drought. The project also supports the development of a national Unified Social Registry and the CTs delivery systems. The Baxnaano program is implemented by the Ministry of Labor & Social Affairs (MoLSA) in partnership with the World Food Program (WFP). In parallel, the project makes investments in developing policies, procedures, and delivery systems for shock-responsiveness, in partnership with the United Nations Children’s Fund (UNICEF).

Last Updated: Sep 19, 2023

The World Bank in Somalia operates in partnership with UN agencies and donors, including Denmark, the European Union, Finland, Germany, Italy, Norway, Sweden, Switzerland, United Kingdom, United States, and the World Bank State and Peacebuilding Fund, which supports the Somalia Multi-Partner Fund. 

Last Updated: Sep 19, 2023