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Overview

  • A sustained period of political and institutional progress reflects a country transitioning out of fragility and protracted crisis. The 2011 Provisional Constitution, the 2012 establishment of the federal government, and the subsequent formation of four new Federal Member States are re-drawing Somalia’s new federal map and creating the space for a political settlement. 

    Although key constitutional questions remain open, federalism offers a new means to negotiate power and resources, and to manage developmental imbalances between the more stable northern regions and those in the south still emerging from conflict. Somalia’s private sector remains a source of resilience and innovation and political relations in the Horn of Africa and Red Sea regions are experiencing dynamic change, with potential new opportunities for Somalia to benefit from its proximity to the Ethiopian market for trade and regional integration.

    Heavily-Indebted Poor Countries (HIPC) Decision Point 

    Somalia reached the Decision Point of the Heavily Indebted Poor Countries (HIPC) initiative on March 25, 2020, restoring the country’s access to regular concessional financing and launching the process toward debt relief. It cleared its arrears to the African Development Bank (AfDB), the International Monetary Fund and the International Development Association, and reduced its external debt to $3.9 billion (78% of the revised 2020 gross domestic product (GDP) from $5.3 billion. 

    On March 31, 2020, Somalia reached agreement with the Paris Club on terms of debt relief, and it is working with remaining creditors to reach similar agreements. Somalia also resumed servicing its outstanding debt to the AfDB and IDA. To receive irrevocable debt relief, Somalia must maintain sound macroeconomic policies, implement its poverty reduction strategy—the Ninth National Development Plan (NDP9)—for at least one year, and complete a set of policy measures known as Completion Point triggers that are aimed at promoting inclusive growth and poverty reduction.

    Economic Development 

    Years of conflict and fragility have left Somalia’s economy with a range of challenges, including population growth outstripping economic growth, acute poverty and vulnerability, recurrent external trade and climate shocks. Weak fiscal space and institutions, active insurgency and an incomplete political settlement have also affected the country’s economic strength.

    Somalia also has several opportunities, as the economy is transitioning from traditional, rural pastoralism to urban, trade and services. Somalia’s economy has remained resilient and is realizing moderate growth despite recurrent shocks and crises, including drought and insecurity. Somalia’s growth in 2019 was estimated at 2.9%, following slow recovery from a prolonged drought in 2016/17. Somalia’s exposure to multiple types of shocks such as climate and water related changes, the locust infestation, conflict and insecurity and more recently, the COVID-19 global health pandemic, presents numerous challenges to a country at a nascent stage of state-building. The effects of COVID-19 are projected to have substantial headwinds on the economy, with growth downgraded from 3.2% before the onset of the health pandemic to potentially negative 2.5 to 3.0% , as consumption falls due to lower remittances and job losses, and exports of livestock decline. A shock of this magnitude is likely to result in structural changes in the economy, with potential job losses in the formal sector and informality further increasing.

    The government is also committed to institutional reforms and reengagement with the region, including opportunities to rebuild human capital and chart a pathway toward economic resilience and growth. 

     

    Last Updated: Jul 17, 2020

  • The World Bank Group (WBG) continues to contribute to a well-coordinated international effort in Somalia, based on partnership between agencies that engage across the humanitarian-development-peace nexus

    The Country Partnership Framework (CPF FY2019-22) was endorsed in September 2018 and guides country engagement for an integrated WBG response. Joint Implementation Plans across the Bank, focusing particularly on the role of the private sector via the International Finance Corporation (IFC), will deliver comprehensively to the client. The CPF helps to identify common constraints limiting development opportunities to focus attention at regional and global level. It also helps drive the data and analytical agenda for the WBG. 

    WBG activities are clustered around two CPF priorities: 

    (1) Strengthening Institutions to Deliver Services

    (2) Restoring Economic Resilience and Opportunities

    COVID-19 and the locust invasion are expected to exact a heavy human and economic toll in Somalia, adding a public health emergency to a situation in which Somalis are already dealing with multiple climate-related crises (cyclical droughts and floods, desert locusts) as well as prolonged armed conflict. 

    The World Bank Group’s support has focused on helping scale government health and livelihoods financing in the short and medium-term, accompanied by a proposed supplemental budgetary support operation. The current country portfolio is approximately $1.23 billion in 18 projects. Recently approved projects include:

    Somalia Crisis Recovery Project ($137.5 million) approved in May, 2020. The project supports the recovery of livelihoods and infrastructure in flood and drought-affected areas and strengthen capacity for disaster preparedness nationwide. The project also includes a $20.5 million emergency investment in COVID response for immediate prevention and containment measures.

    Recurrent Cost and Reform Financing Phase III ($68 million) approved in June 2020. The new phase evolves the RCRF program towards protecting basic services through performance-based fiscal transfers to Federal Member States.

    Somalia Re-engagement and Reform Supplemental Development Policy Financing ($55.0 million) approved in June, 2020. The goal objectives of the DPF are to facilitate full normalization of relations with the World Bank Group (WBG) and support Somalia’s economic recovery through policy reforms that strengthen fiscal management and promote inclusive private sector-led growth. The proposed supplemental financing aims to mitigate the effects of the global coronavirus disease (COVID-19) crisis on the reform program supported by the DPF.

    Shock Responsive Safety Net for Locust Response Project ($40.0 million) approved in June, 2020. The project focuses on addressing the immediate impact of the locust infestation on poor and vulnerable households by meeting their short-term food security and consumption needs and protecting their livelihoods and human capital assets through emergency cash transfer. 

    Last Updated: Jul 17, 2020

  • The World Bank program in Somalia is co-financed by International Development Association grants since March 2020 and builds on and scales-up a portfolio largely funded by the Multi-Partner Fund (MPF), and pre-arrears clearance grants that has supported wide ranging reforms. The current portfolio focuses on core state functions, socio-economic recovery and urban development in Somalia through 18 projects totaling $1.23 billion. 

    Supporting Reforms

    Improving public financial accountability and institutional development: With the support of MPF-funded Capacity Injection Project (CIP) and the Somaliland Civil Service Reform Project, the government has assisted ministries and departments to develop management plans, strengthened Human Resource functions and payrolls, and financed the appointment of staff, including women, to line ministries and core government agencies to remedy gaps in institutional capacity. The federal government (FGS) continues to rebuild its core public financial management systems, notwithstanding the COVID-19 pandemic. The Ministry of Finance (MoF) is currently preparing regulations covering budget preparation and execution, payment processing, cash advances, and cash management and banking. The federal government continues to publish the annual budget, quarterly financial statements, and monthly execution reports. All five federal member states (FMS) now publish quarterly all-of-government revenue realization and budget execution. The Bank-supported Financial Governance Committee has overall oversight of financial governance and has to date reviewed 42 concessions contracts resulting in the amendment of 30. 

    Increased domestic revenue mobilization and resource sharing: In collaboration with the International Monetary Fund, the World Bank has supported initiation of a revenue mobilization strategy, a new Revenue Law clarifying FGS/FMS responsibilities, development of tax policy units and deployment of tax identification numbers. The inter-governmental fiscal framework and harmonization of taxes will require sustained engagement but the Recurrent Cost and Reform Financing Project (RCRF) is convening Ministers of Finance, reaching agreements and harmonizing the approach to fiscal transfers, through Development Policy Financing . The Public Expenditure Review due in FY21 includes domestic revenue mobilization, fiscal federalism, wage bill and public financial management assessment. Improving systems for inclusive social services in social protection, health, and education are ongoing through the Baxnaanu safety net program. This includes the development of a national social registry benefiting 200,000 households. Through RCRF, the FGS has undertaken proficiency testing of nearly 3,000 primary and secondary teachers and is preparing to provide case management and safe spaces for victims of gender-based violence. 

    Enhanced Infrastructure: With support of the Somalia Urban Resilience Project (SURP) I and II, the FGS and FMS have begun road rehabilitation and generated employment in the transport sector in Mogadishu and Garowe, which has helped to build capacity of municipalities in urban resilience. SURP II is financing additional road construction in Kismayo and Baidoa, and scale investments in Mogadishu and Garowe, and plans to scale-up to other urban areas in Somalia.

    Creating business opportunities: With World Bank and International Finance Corporation (IFC) support, Somalia has made gains on improving the business environment and lowering barriers to entry. With assistance from the SCORE project, Somalia has adopted laws and regulations to strengthen the business climate; launched a business registration system in Mogadishu; improved payment systems and approved new mobile money regulations. It also commenced implementation of the Communication Act with the adoption of regulations on interconnection, altogether with the establishment of the Communications Authority. 

    Strengthening access to digital finance: IFC has commissioned a diagnostic which covers broad topics of Micro, Small and Medium Enterprises (MSME) banking, agribusiness finance and digital finance. The outcome of the study will provide input to the design of targeted solutions to enhance financial inclusion including digital finance]. The SCALED-UP project has successfully established the MSME Financing Facility (“Gargaara”), building on the earlier Multi-Partner Fund-financed SCORE, which mobilized $6.5 million in private financing and created more than 2,000 jobs job through its catalytic matching grant scheme. In addition, the FGS has adopted a Digital ID Policy and made progress toward issuing licenses to telecom operators. 

    Last Updated: Jul 17, 2020

  • The World Bank Somalia portfolio is supported by the Somalia Multi-Partner Fund (MPF), a $476 million Multi-Donor Trust Fund activated in August 2014. The MPF is supported by the European Union, United Kingdom, Germany, Sweden, Norway, Denmark, Switzerland, Finland, United States, Italy, and the World Bank State and Peacebuilding Fund. 

    Somalia is also eligible for and receives support from the International Development Association, the World Bank Group’s fund for the poorest countries. 

    Last Updated: Mar 23, 2020

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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

Main Office Contact
Delta Center
Menengai Road, Upper Hill
PO Box 30577-00100
Nairobi, Kenya
+254-20-293-6061
For general information and inquiries
Hugh Riddell
Country Manager
Nairobi, Kenya
+254-20-293-6061
hriddell@worldbank.org
For project-related issues and complaints
somaliaalert@worldbank.org