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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 continued advancing 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, approved in December 2023, is supporting Somalia¡¯s post-HIPC economic agenda with the Executive Board of the IMF concluding the second review under the new program in December 2024. However, increased uncertainty due to the expected reduction in official development assistance poses a significant challenge to sustaining these achievements.

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¡ªrapid urbanization, the growing use of digital technologies, planned investments in energy, ports, education, and health¡ªso 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 averaged only 2.4% annually in 2019¨C24 with an average negative real GDP per capita growth of 0.4%.

In 2024, sustained favorable rains improved agricultural production and led to better food security and higher private consumption; economic growth remains strong, standing at 4% in 2024, compared to 4.2% in 2023.

Exports recovered faster than imports, as livestock and crops exports rebounded. Imports of goods and services grew at a slower pace, supported by high demand for food and medicines and easing of global food and oil prices. Nevertheless, trade gap widened to 62.1% of GDP in 2024, from 60.8% in 2023. The current account deficit narrowed to 8.9% of GDP in 2024 on the back of strong growth in remittances and external on-budget aid. Inflation eased further compared to 2023, but overall inflation remained sticky at 5.5% in 2024. Fiscal accounts were in small surplus supported by higher external grants and tax revenue.

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 and urban population. 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 mandate of the African Union Transition Mission in Somalia (ATMIS) ended in December 2024 and has been replaced by the African Union Support Mission in Somalia (AUSSOM).

Last Updated: Apr 09, 2025

ľ¹ÏÓ°Ôº 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 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¨C28 (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 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.

ľ¹ÏÓ°Ôº 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:

¨C 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.

($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¨C2024, as well as IDA20 policy commitments on governance and institutions, and FCV. The DPF is the first of two operations in a programmatic series.

 ($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: Apr 09, 2025

ľ¹ÏÓ°Ôº¡¯s International Development Association (IDA) program in Somalia, co-financed by the  and other resources, has a total active Bank portfolio of $2.43 billion comprising 15 national projects (including budget support) and 6 regional projects (as of March 15, 2025), including:

 - 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 Federal Government of Somalia (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.

 and : 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. 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 recently completed a $65 Response to Urban Forced Displacement Component to support key cities experiencing large inflows of internally displaced persons, benefiting more than a million people.

The  enabled the launch of Somalia¡¯s first national digital identification (ID) system in 2023 which is expected to facilitate access to government and basic financial services for Somalis, particularly women. Registrations for the digital ID have begun in the Benadir, Galmudug, and Southwest regions, and are expected to expand across the country in the coming months.

The ¡°Gargaara¡± Company Limited, Somalia¡¯s first micro, small, and medium enterprise (MSME) wholesale financing facility, was established in 2019 and has disbursed over $27 million (with $22 million from SCALED-UP funds and $5 million from KfW) of funds benefitting approximately 1,900 businesses, among which about 45% are women-owned/led.

The Somalia Business Registration System (SBRS) was launched in 2022 making it easier and faster to register businesses (reduced to 1 week from 8 weeks) and obtain licenses online; over 5,700 businesses have been registered to date. SCALED-UP is supporting upgrade to critical legal frameworks for financial, private, and digital financial services. It has supported reforms for the modernization of the Central Bank of Somalia and the Financial Reporting Center (FRC), including support for launching of the National Payment System, making transactions more secure, faster, and cheaper, as well as the completion of first National Risk Assessment on Money Laundering and Terrorism Financing. Moreover, the project enabled the launch of Somalia¡¯s first Data Protection Authority and the National Communication Agency, critical institutions to support the uptake of digital services in the country. Additional efforts are underway to enhance Somalia¡¯s digital infrastructure including establishment of a National Data Center and support for the Electronic Management Information Systems for Office of the Accountant General (OAG) facilitating transparent government-to-person (G2P) and government-to-business (G2B) digital transactions.

 supported the operationalization of the National Social Protection Policy through the government-led national shock responsive social protection system in Somalia, known as ¡°µþ²¹³æ²Ô²¹²¹²Ô´Ç¡± 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: Apr 09, 2025

ľ¹ÏÓ°Ôº in Somalia operates in partnership with UN agencies and donors, including Canada, 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¨C2024 (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