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World Bank Approves $55 million to Sustain Somalia’s Reforms and Fiscal Response to Multiple Crises

The World Bank Board of Directors has approved a $55 million International Development Assistance (IDA) grant to support Somalia’s economic recovery through continued fiscal and other economic policy reforms. The policies will strengthen fiscal management and promote inclusive private sector-led growth.

The supplemental financing helps Somalia ease the effects of the global COVID-19 crisis and continue implementing the reform program supported by the Somalia re-engagement and reform supplemental Development Policy Financing (DPF). The DPF delivers critically needed financing for Somalia’s revised 2020 budget, which allocates funds for an integrated and national response to the pandemic, including increased grants to sub-national government to ensure continued service delivery.

“Our revised budget expands cash transfers to vulnerable households and provides a substantial increase in grants to subnational governments to help them respond to the pandemic in the face of declining revenue,” said Dr. Abdirahman Beileh, Minister of Finance. “The supplemental financing will help in plugging our public expenditure gap given the 29% domestic revenue shortfall and 2.5% GDP contraction in 2020.”

The World Bank and the International Monetary Fund approved Somalia’s eligibility for the Heavily Indebted Poor Countries (HIPC) Initiative on March 25, 2020, removing the constraints on economic growth and poverty reduction and providing access to IDA instruments to mitigate the impact of multiple crises in Somalia.

“The budget support will help protect lives and livelihoods and strengthen the capacity of Somali institutions to respond to the triple crisis of COVID-19 pandemic, locust invasion and flooding that threatens to derail Somalia’s reform program and its emergence from fragility,” said Hugh Riddell, World Bank Country Manager for Somalia.

The DPF is one component of the World Bank Group’s comprehensive response to the multiple crises Somalia is facing and includes investments in health systems, support for livelihoods threatened by locusts and flooding, improved fiscal coordination between federal and state governments, and financing of direct cash transfers to poor and vulnerable households. COVID-19 has spread rapidly in Somalia, which now has one of the highest infection rates in the region, with 18.7 cases per 100,000 people. Decades of conflict and state fragmentation have left Somalia’s public health system constrained and unable to mount an adequate, timely, and effective response to manage the COVID-19 crisis.

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