WASHINGTON, July 27, 2022-The World Bank approved a $100 million grant to support the continuation of Somalia's reform efforts in reaching the Completion Point of the Heavily Indebted Poor Countries (HIPC) Initiative, when Somalia will be eligible for full and irrevocable debt relief.
The operation supports the government's efforts to improve fiscal transparency and increase revenues through the harmonization of customs regimes across the federation and improving the governance of intergovernmental fiscal transfers. It will help create the building blocks for strengthening intergovernmental fiscal cooperation to enhance the ongoing state stabilization agenda critical for stimulating inclusive economic growth by fostering trust and enhancing financial transparency between the federal government and member states. As Somalia continues to face climate-related shocks, the program also supports actions to enhance economic resilience and investment in sectors such as fisheries and renewable energy to create jobs and spur growth.
These efforts will help create fiscal space to allow government authorities to respond to the deteriorating drought situation and rising prices for food, fuel, and other staple products. Together, these efforts will help improve the government's ability to continue to provide cash transfers for the country's poor and most vulnerable, including women, which are a critical coping mechanism amidst continuing shocks.
"This operation will increase the government's fiscal space to respond to the drought situation, while continuing to support reforms that advance progress towards attaining debt relief," said Kristina Svensson, World Bank Country Manager for Somalia.
By supporting a package of policy and institutional reforms that are owned and implemented by the government, this financing is expected to achieve development outcomes that contribute to a sustainable reduction in poverty by promoting growth and enhancing the well-being of poor people. Over the past two years, policy operations have helped improve revenue mobilization and the legal framework for the private sector. For example, the Somali Business Registration and Licensing System (SBRLS) has made it easier and faster for entrepreneurs to register new businesses and obtain licenses
Somalia remains vulnerable to shocks, including repeated cycles of drought and floods, higher commodity prices and the COVID-19 pandemic, which continue to test the resilience of the Somali population. In June 2022, 46% of the Somali population was estimated to face food insecurity due to worsening drought conditions and inflationary impacts such as rising food and fuel prices, in part due to the war in Ukraine. Despite these challenges, Somalia has maintained macroeconomic stability and has continued participating in the HIPC Initiative to seek debt relief. Several HIPC Completion Point triggers have been completed, and the remaining actions - which mostly require the approval of new legislation - will be prioritized by the recently formed 11th Parliament.
*The World Bank's International Development Association (IDA), established in 1960, helps the world's poorest countries by providing grants and low to zero-interest loans for projects and programs that boost economic growth, reduce poverty, and improve poor people's lives. IDA is one of the largest sources of assistance for the world's 74 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change to the 1.3 billion people who live in IDA countries. Since 1960, IDA has provided $458 billion to 114 countries. Annual commitments have averaged about $29 billion over the last three years (FY19-FY21), with about 70 percent going to Africa. Learn more online: IDA.worldbank.org. #IDAworks
