The World Bank in Somalia

Somalia is progressing its policy reform agenda while leveraging the momentum created by the Heavily Indebted Poor Countries (HIPC) Initiative. Despite multiple climatic shocks and a complicated security situation, Somalia maintained progress on structural reforms. In addition, Somalia maintained a track record of sound macroeconomic management as evidenced by the satisfactory implementation of the International Monetary Fund (IMF) Extended Credit Facility (ECF) program. A new 3-year ECF arrangement started in January 2024 to support Somalia’s post-HIPC economic agenda with the Executive Board of the IMF concluding the first review under the new program in June 2024.

Political relations in the region are experiencing dynamic change, with new opportunities for Somalia to benefit from regional trade integration as it became the eighth member of the East African Community in March 2024. As Somalia moves out of fragility, it needs to gradually transition from relying on humanitarian aid to sustainable development approaches.

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 droughts, floods, locust infestation, the pandemic, volatile global prices, as well insecurity and conflict have slowed the transition from fragility. Real GDP growth has been low and volatile, averaging only 2.1% per year in 2019–23 with an average negative real GDP per capita growth of 0.7%.

In 2024, sustained favorable rains improved agricultural production and led to better food security and higher private consumption, accelerating economic growth to an estimated 4.4% from 4.2% in 2023. Exports recovered faster than imports, as livestock exports rebounded. Private sector credit growth contributed to strengthening investment, particularly in construction and real estate. Remittances increased significantly, bolstered by the moderation of global inflation and the uptick in economic growth in several host countries. The trade deficit is estimated to slightly narrow to 60.2% of GDP in 2024 compared to 62.6% in 2023, as livestock exports improved.

Repeated shocks have eroded households’ assets and purchasing power, increasing the risk of more people falling into poverty. In 2022, an estimated 54% of the Somali population lived below the national poverty line. According to the 2022 Integrated Household Budget Survey, poverty rates are larger among the nomadic population, however, due to the country’s high urbanization, the majority of the poor are in urban areas. Labor force participation rates are exceptionally low, with significant gender gaps. Only one-third of men and 12% of women participate in the labor market. Almost half of those employed are living below the poverty line, indicating that jobs are of low productivity. Therefore, accelerated momentum in building institutions and developing resilience is fundamental for growth, poverty reduction, and transition from fragility.

The African Union Transition Mission in Somalia’s (ATMIS) mandate ends in December 2024 with the Government of Somalia proposing a new security arrangement as the drawdown is in full force. African Union Support Mission in Somalia (AUSSOM) will replace ATMIS.

Last Updated: Oct 23, 2024

The World Bank Group (WBG) continues to contribute to a well-coordinated international effort to support Somalia, leveraging various financial instruments including, ramped-up International Development Association (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. 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 recently launched Somalia Poverty and Equity Assessment focuses on three deep-dive topics: (i) Somali livelihoods, looking at the type of income, type, and sector of employment ; (ii) response to shocks, especially among vulnerable populations; and (iii) the poverty among nomadic populations. 

The overarching goal of the current FY24–28 Country Partnership Framework (CPF) is to continue to assist 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 fragility, conflict, and violence (FCV). It is also aligned with the World Bank’s Evolution Road Map and the World Bank mission to end extreme poverty and boost shared prosperity on a livable planet. The CPF features Macroeconomic Stability and Governance Foundations as a cross-cutting, foundational High-Level Outcome (HLO), which responds to FCV drivers in the Risk and Resilience Assessment (RRA) and reflects elements of the Systematic Country Diagnostic (SCD) Update’s foundational HLOs related to economic governance as well as security, participation, and access to justice.

The World Bank will complement assistance that advances its traditional poverty reduction goals, such as financing for Micro, Small and Medium-sized Enterprises (MSMEs), which are critical for job creation, with support for broader Evolution priorities, such as inclusion through education, health, and social protection services for youth and women and sustainability through assistance to strengthen government systems and ensure access to cleaner energy and improved water sources. The CPF will support Climate Change Adaptation and Mitigation through investments in renewable energy, climate-resilient infrastructure, and disaster risk management. The CPF will also improve Food and Nutrition Security through regional and national projects enhancing pastoralists’ access to finance and food security systems and providing shock-responsive cash transfers. Regional lending will enable digitalization through investments in cross-border digital infrastructure and broadband access.

Recently approved projects include:

Somali Sustainable Fisheries Development Project – Badmaal ($55 million) is a project aimed at improving the capacity of targeted communities and authorities to benefit from and effectively manage selected fisheries. The project will assist the preservation of valuable resources while incentivizing and guiding private sector investment to realize the potential of a sector that has remained largely untapped until now.

First Somalia Economic Resilience Development Policy Financing (DPF) ($125 million) will promote economic resilience through more sustainable public finances and resilient private sector development. The Project Development Objective will be achieved through implementation of the policy and institutional reforms supported by two pillars, ensuring sustainable public finances and enabling resilient private sector development. The operation aligns with Somalia’s Ninth National Development Plan for 2020–2024, as well as IDA20 policy commitments on governance and institutions, and FCV. The DPF is the first of two operations in a programmatic series.

Accelerating Sustainable and Clean Energy Access Transformation in Somalia ($100 million). The project seeks to increase access to renewable energy through private sector participation in Somalia, which aligns with the ASCENT Multi-Programmatic Approach (MPA) Program Development Objective of accelerating access to sustainable, reliable and clean energy in Eastern and Southern Africa.

Last Updated: Oct 10, 2024

The World Bank’s International Development Association (IDA) program in Somalia, co-financed by the Multi-Partner Fund (MPF) and other resources, has a total active Bank portfolio of $2.43billion comprising 15 national projects and 6 regional projects (as of September 30, 2024) including:

Somalia is on a journey to ensure sustainable development of its water resources for its communities. With the support of the World Bank, the Somaliland and Puntland states piloted low-cost and conflict-deterring water solutions under the Water for Agro-Pastoralist Livelihoods Pilot Project (WALP), a $2 million pilot that resulted in the building of eight sand dams over the period 2016 to 2018. This investment paved the way for the ongoing Water for Agro Pastoral Productivity and Resilience (Biyoole) Project. An increased budget ($42 million) allowed to scale up activities across Puntland, Galmudug, and Southwest States. The two projects validate the country’s approach to increasing water catchment in the drylands through sand dams which have the potential to protect water from high evapotranspiration whilst supplying in small amounts water for both domestic and agricultural consumption.

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 training sessions, and exposure- and experience-sharing visits. The project has also delivered veterinary clinics, providing extensive services to the pastoral community.

Recurrent Cost and Reform Financing (RCRF) Project - Phase III: 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. Gargaara disbursements have reached over $23 million to 1,638 enterprises, among which 45% are women-owned. 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 government 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). Significant progress has been made with the rollout of the Digital ID - four ID registration sites and six mobile teams are currently operational in the Benadir Regional Administration. 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 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: Oct 10, 2024

The World Bank in Somalia operates in partnership with UN agencies and donors, including Denmark, the European Union, Germany, Italy, Norway, Sweden, Switzerland, United Kingdom, United States, and the World Bank State and Peacebuilding Fund, which supports the Somalia Multi-Partner Fund (MPF).  The MPF was recently extended up to June 2028.

The MPF was established in 2013 to support government-led state building (at both federal and state levels), economic growth, and urban development, as well as to help normalize Somalia’s relations with international financial institutions (IFIs). The MPF has played an important role as one of the funding windows to support implementation of Somalia’s Ninth National Development Plan 2020–2024 (NDP9) and was the primary source of financing for the World Bank Group’s (WBG) early re-engagement in Somalia after more than two decades of disengagement. The role of the MPF has evolved over the past decade from supporting early efforts to building core government functions and institutions to supporting forward-looking policy and investment dialogues, enhanced risk framework, and leveraging and complementing catalytic grant financing, while continuing to support strengthening core state functions.

Last Updated: Oct 10, 2024