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.

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Somalia is entering a crucial phase, seeking to move beyond years of conflict with new development plans. The National Transformation Plan 2025–2029 and Centennial Vision 2060 outline significant state and institution-building reforms, aimed at inclusive growth, job creation, and reducing fragility. The government is working to maintain fiscal sustainability and align spending with available resources. However, Somalia continues to rely heavily on foreign aid to provide basic services. Key policy reforms have focused on increasing domestic revenue, improving financial management and inclusion, strengthening governance, and enhancing statistics. Additional risks stem from global economic volatility and geopolitical tensions, while underfunding of key security missions and political uncertainties surrounding upcoming elections may hinder progress and disrupt reforms.

As Somalia undertakes the reconstruction of its economic governance institutions, the country is presented with numerous opportunities, such as rapid urbanization, increasing adoption of digital technologies, and planned investments in sectors like energy, ports, fisheries and agriculture. Strengthening resilience to shocks is therefore crucial for fostering economic growth and generating employment.

Somalia’s economy continues to grow, although growth moderated to an estimated 3% in 2025 from about 4% in 2023–24. The slowdown reflects reduced foreign aid and drought conditions that weighed on household spending and agriculture. The outlook remains challenging amid declining foreign aid, climate shocks, and higher global food and fuel prices. Inflation averaged 3.7% in 2025 and is expected to pick up further, driven mainly by rising food, transport, and energy costs, continuing to strain household budgets. Risks to the outlook remain significant, including further aid reductions, climate and security disruptions, and global developments affecting remittances and import prices.

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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).

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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.

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The World Bank is advancing Somalia’s state-building and resilience agenda through flagship projects that strengthen governance, service delivery, and fiscal federalism. Programs are delivering at scale despite a fragile operating environment. A strengthened fiduciary and safeguards system, combined with adaptive risk management and government-led implementation, underpins a credible, high-impact portfolio aligned with state‑building, resilience, and service delivery.

• Social Protection (Baxnaano) reached 200,000 of the poorest households with nutrition‑linked transfers and has provided shock‑responsive cash to over 400,000 households. The Unified Social Registry is being rolled out nationwide to increase vulnerability-based targeting and reduce delivery risks.
• Health (Damal Caafimaad): Over 5 million beneficiaries reached; more than 150,000 safe deliveries supported; and measurable gains achieved in stewardship, regulation, and information systems.
• Education programs have expanded access, supported 157 schools, and trained 2,600 newly recruited teachers under Somalia’s first merit‑based system.
• Digital Transformation: The National digital ID rollout is underway; payment systems and digital infrastructure have been strengthened.
• Urban Resilience and Water: Integrated urban infrastructure has been delivered across seven cities; rural water supply has been scaled through Barwaaqo; groundwater resilience investments are expected to serve 205,000 people.
• Private Sector Development: Financial inclusion has been deepened through the Gargaara MSME facility, digital ID integration, business registration systems, and investment readiness programs.

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