Federal Republic of Somalia

The Federal Republic of Somalia has made significant progress in recent years, consolidating its federal system of governance, strengthening the capacity of government institutions and supporting inclusive private sector-led growth, while leveraging the momentum created by the Heavily Indebted Poor Countries (HIPC) Initiative. Despite climatic shocks and a complicated security situation, Somalia continued advancing structural reforms and maintained sound macroeconomic management, as evidenced by the satisfactory implementation of the IMF Extended Credit Facility (ECF) program. A three-year ECF arrangement, approved in December 2023, is supporting Somalia’s post-HIPC economic agenda with the Executive Board of the IMF, concluding the fourth review in December 2025.

However, rising uncertainty stemming from reductions in official development assistance and climate-related impacts poses a significant challenge. Political relations in the region have changed, with new opportunities for Somalia to benefit from regional trade integration, as it joined the East African Community in March 2024.

The lack of jobs for young labor market entrants is a contributing factor to poverty and instability across the region, and particularly in Somalia where nearly 500,000 enter the labor force annually but only around 80,000 jobs are created. The security situation remains fragile and political landscape is increasingly complex.

The World Bank in Somalia operates in partnership with UN agencies and donors, especially donors contributing to the Somalia Multi-Partner Fund (MPF) - Canada, Denmark, EU, Germany, Italy, Norway, Sweden, Switzerland, UK, and the US. The MPF supports the objectives of the Country Partnership Framework 2024-2028, by co-financing operations, analytics, and activities to enhance the risk management approach to operating in fragile environment with limited capacity.

Somalia's economy remains vulnerable to external and climate-related shocks despite significant progress in strengthening macroeconomic institutions and structural reforms. Key achievements, including debt relief under the Heavily Indebted Poor Countries Initiative, accession to the East African Community, improvements in public financial management, stronger domestic revenue mobilization, and enhanced financial sector regulation, have increased economic resilience. Structural constraints persist, including dependence on imports and external assistance, a narrow export base, security challenges, weak institutional capacity, and an incomplete federal architecture. These constraints limit investment, productivity growth, and job creation.

As economic governance institutions are rebuilt, new opportunities are emerging through rapid urbanization, expanding digital connectivity, greater financial inclusion, and investments in infrastructure, energy, ports, fisheries, agriculture, and private sector development. Sustained reforms to strengthen domestic revenue mobilization, fiscal federalism, private investment, and job creation will be critical to supporting the country's long-term development objectives.

Economic growth moderated to 3.1% in 2025 from 4% in 2023–24 which reflects declining foreign aid, drought, and rising living costs, which weigh on domestic demand and agricultural production. Real GDP growth is projected to slow to 2.5% in 2026 before recovering over the medium term. Inflation accelerated to 6.7% year-on-year in July 2026, up from 2.7% in July 2025, driven by higher food and fuel prices. Inflation is expected to peak in 2026 and gradually ease, reaching 4% by 2028.

The outlook remains highly uncertain, reflecting volatility in external aid flows, heightened political and security risks, and climate vulnerability. The prolonged conflict in the Middle East could weaken growth, increase inflationary pressures, slow poverty reduction, and exacerbate food insecurity.

Somalia’s IDA portfolio totals $2.34 billion, including six regional projects totaling $523 million. Engagement spans governance, social protection, health, education, digital development, energy, climate resilience, water, infrastructure, and private sector growth, with a strong focus on strengthening Somali systems, building state capacity, and expanding service delivery in a fragility, conflict, and violence (FCV) context.

The International Finance Corporation (IFC) portfolio emphasizes financial inclusion, with three key projects - the Credit Information System, the Somalia Microfinance Program and Women-led Small and Medium Enterprises Non-Financial Services.

The Multilateral Investment Guarantee Agency (MIGA) has committed to helping attract foreign direct investments after Somalia became MIGA’s newest member country in March, 2020. As of August 31, 2025, MIGA is engaged in Somalia with a total gross exposure of $5.7 million for a project in the energy sector.

Some of the recently approved projects include the following: Bulsho: Strengthening Community and Local Institutions for Social Cohesion, Inclusion, and Resilience ($35 million); Somalia Productive, Resilient, and Inclusive Growth (SPRING) ($105 million); Second Somalia Economic Resilience Development Policy Financing (DPF 2) ($125 million); and Building Opportunities and Outcomes in Social Protection and Youth Employment in Somalia (BOOST-YOU) ($112 million).

The current FY24–28 Country Partnership Framework(CPF) is the joint strategy between the WBG and the government, to reduce poverty and improve the livelihoods of the people of Somalia. It is aligned with Somalia’s National Transformation Plan (NTP) and informed by the 2023 Systematic Country Diagnostic (SCD) update, the 2023 Somalia Risk and Resilience Assessment (RRA), the 2023 Country Private Sector Diagnostic (CPSD), and the 2023 climate risk assessment. The previous CPF (FY19-23) scaled up assistance to Somalia to support core government systems, private sector-led growth, and resilience, after Somalia reached the decision point of the Heavily Indebted Poor Countries (HIPC) initiative and normalized relations with IDA.

The overarching goal is to continue assisting Somalia in building a more stable, visible, and legitimate state capable of providing basic services, fostering inclusive private sector-led growth, and building resilience, with a view to restoring the social contract and enabling Somalia’s emergence from FCV. The CPF supports three core outcomes: (1) Inclusive, private-sector-led job creation and economic growth; 2) Enhanced human capital; and (3) Greater resilience to climatic and other shocks.

The WBG contributes to a well-coordinated international effort to support Somalia. Leveraging various financial instruments, including ramped-up IDA financing, for long-term state and institution-building on the one hand, and short-term relief and resilient recovery from recent crises on the other.

The IFC is supporting upstream reforms and undertaking advisory engagements to lay the groundwork for investments. MIGA, which issued its first guarantee for a solar energy project in FY23, is looking to replicate and scale up green energy investments.

Somalia’s social protection program, Baxnaano has reached 4 million people with cash transfers and investments. The Unified Social Registry is increasing vulnerability-based targeting. In 2026, $35 million in Crisis Response Window financing provided emergency cash to 498,000 shock-affected people.

Health (Damal Caafimaad): 5 million beneficiaries reached; 12 million clinic visits, care for 317,000 mothers, and 265,000 safe births. The project supports 235 public health facilities and 3,900 health workers, and health and nutrition services reached 800,000 malnourished children.

The Water for Rural Resilience (Barwaaqo) Project helped 337,434 people have access to improved water sources (46% women) and is helping prepare for climate shocks (droughts and El Niño-related floods) with investments in water harvesting, storage, groundwater recharge, watershed management, and productive use.

Integrated urban infrastructure was delivered including: climate-resilient 145-meter Gambol Bridge; 39 km of roads, 45 km of pedestrian walkways, and 10 km of drainage; improved access to climate-resilient infrastructure for 700,000 people, generating 526,000 person-days of employment for 15,000 workers.

Education programs have expanded access, supporting 152 schools and learning centers, 44,353 learners(40,191 women and 1,507 learners with disabilities), and trained 2,600 new teachers.

Financial inclusion deepened with 5,806 MSME loans worth $47.13 million disbursed to businesses, with women-owned/managed receiving 49% of all loans disbursed ($5.47 million). 8,414 firms benefited from reformed registration requirements and $19 million in private capital was mobilized.

The National digital ID is rolling out and payment systems and digital infrastructure strengthened. 1,385,251 people (6/30/2026) received unique ID numbers (665,304 women). Four shared digital platforms were introduced, including the National Payment System which processed $2.4 billion in transactions in 2025.