NAIROBI, August 7, 2025 — The World Bank’s Board of Executive Directors has approved a second Development Policy Financing (DPF) operation that will continue the Federal Republic of Somalia’s reform momentum. The $125 million International Development Association (IDA)* grant is the second and last of two operations in a program that aims to support the Federal Republic of Somalia promote economic resilience through more sustainable public finances and resilient private sector development. The first DPF of the same amount was approved in 2024 and forms the basis for the current one.
“This DPF is a testament of the government’s unwavering commitment to implement institution-building reforms to construct a more stable state and enhance resilience to rebuild the social contract,” said Hideki Matsunaga, World Bank Country Manager for Somalia. “These reforms are designed to enhance the efficiency, transparency, and accountability of public institutions, thereby creating a conducive environment for private sector investment and generating jobs.”
The DPF will facilitate reforms that enable the Federal Republic of Somalia to move toward sustainable public finances by increasing tax revenue and enhancing accountability and efficiency of public expenditure. In this way, Somalia can create the building blocks for adequate funding for development and reduce dependency on external aid.
The operation will increase investments in renewable energy generation and access to electricity, contributing to achieving a target of 50MW of renewable energy capacity by December 2026. The country has significant potential for using renewable energy for electricity generation. Reduction in electricity costs and increased reliability will help spur economic growth by increasing energy efficiency, creating jobs, and improving service delivery.
To spur private sector growth, the DPF will promote the development of the microfinance industry and drought insurance, including allowing easier access to finance for women with no bank accounts and thus contributing to gender equity. It will improve exports of seafood products by encouraging further investment in fisheries, including cold storage and processing; and enhance access to broadband connectivity. These reforms address key constraints to private sector growth and job-creation, thereby strengthening resilience against adverse shocks.
“Efforts to enhance domestic resource mobilization, supported by the DPF, are imperative for decreasing dependency on external aid in the face of declining external grants,” said Stella Ilieva, Task Team Leader and Senior Economist. “These efforts, together with actions to manage prudently and efficiently public accounts contribute to macroeconomic stability and increase fiscal space for productivity enhancing investments.”
The reforms supported in this operation complement the World Bank’s broader engagement in the Federal Republic of Somalia and are aligned with the objectives of the World Bank’s Country Partnership Framework for Somalia (FY24–28). Achieving the results of this DPF is closely linked to the World Bank’s portfolio and investments by other development partners. Furthermore, this operation aligns with corporate commitments on climate co-benefits, reducing gender gaps, and maximizing finance for development.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s low-income countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve people’s lives. IDA is one of the largest sources of assistance for its 78 client countries, 39 of which are in Africa. Since 1960, IDA has provided $552 billion to 115 countries. Annual commitments have averaged about $36 billion over the last three years (FY21-FY23), with about 75% going to Africa.
Contacts:
In Nairobi:
Vera Rosauer, vrosauer@worldbank.org
In Washington:
Daniella van Leggelo-Padilla, dvanleggelo@worldbank.org
