Somalia needs macro-economic stability

The World Bank country representative for Somalia Kristina Svensson spoke to James Anyanzwa about the Bank’s commitment to supporting Somalia’s social-economic and political reform programmes.

What is the World Bank’s assessment of the socioeconomic reforms in Somalia so far?

Somalia has come very far in the last two years and they have done that through a lot of hard work from the Somali side and a lot of support from ourselves and international partners.

They have prepared the ninth development plan (NDP 9), which covers the period 2020 to 2024, and implementing this plan for at least one year is one of the requirements for Somalia to be eligible for full and irrevocable debt relief, which they will be reaching out for when they reach the Heavily Indebted Poor Countries (HIPC) completion point. 

Unfortunately, just as the NDP 9 was approved in March 2020 Covid-19 started and the country was also hit by floods and locust infestation. At that point, the economy contracted by 0.3 per cent against a projected growth of 3.5 per cent. 

These triple crises reduced demand for Somali exports – dominated by livestock, – caused damage to infrastructure and a decline in agricultural production. This has continued even after 2020 and has been compounded by the war in Ukraine.

Somalia is dependent on imports and the high prices of grain and oil directly affect Somali consumers and particularly the poor, who spend more than 70 per cent of their consumption on food.

Now we are in the middle of one of the worst droughts that Somalia has seen in 40 years and this again means a limited possibility for domestic production.

The conditions in Somalia have been tough and economic resilience needs to be strengthened.

How soon will the country be fully eligible to borrow?

Somalia could reach the HIPC completion point at the end of 2023. But to do that the authorities need to maintain macroeconomic stability, which is not easy with all these shocks hitting the economy.

They need to maintain satisfactory progress under the IMF Extended Credit Facility and to complete structural reforms, which are the HIPC completion point triggers in health, education and social protection.

Somalia also needs to complete negotiations with all the remaining creditors.

How is the Bank helping plug the gaps left by insecurity and conflict?

Our programme is focused on three main areas: First is support to building systems and institutions and improving governance and service delivery. We support the continued strengthening of government systems and public financial management systems and audit their intergovernmental fiscal transfers.

The second component of our support is towards the creation of an enabling environment for the private sector to thrive.

The third area, which we have stepped up is the focus on resilience. We have a social safety net programme that provides cash transfers through the leadership of the Ministry of Labour and Social Affairs. We also have an emergency window called the shock response window that is benefitting over two million individuals. The second programme is a water and agriculture project that supports the strengthening of the resilience of rural communities.

One of Somalia’s problems is the lack of data on key sectors of the economy. How does the Bank support Somalia to address this?

One of the first projects we approved was the Somali Integrated Statistics and Economic Planning Capacity Building project, which has been implemented since September 2020. We also financed the Somalia Integrated Household Budget Survey, which would be the basis for measuring development and progress in reducing poverty and also providing new sustainable development goals indicators including general equality and access to finance and land ownership.

But of course, the Somalia National Bureau of Statistics needs continuous support to start estimating GDP from the production approach and harmonised consumer price index.

How does the Bank ensure accountability for what it gives?

We are continuously working with the Somalis to strengthen their systems and their own accountability.

We also follow the World Bank controls. Somalia is high risk and we apply the highest mitigating measures that the World Bank does in any country, including 100 per cent prior review for procurement.

We also use third-party monitoring agents that we can deploy to certain projects to provide valuable information about cases.

Finally, we are also using a lot of innovative tools, for instance, dashboards, to see the progress of certain infrastructure projects in real-time.

How much funding is in the pipeline from the Bank toward Somalia?

We have a three-year IDA cycle for all countries that started in July. Under that Somalia has been allocated an envelope based on population and needs.

Because Somalia is a fragile post-conflict country, it gets additional financing. So, it is about $800 million for the three years. So far, we have approved close to $350 million. 

Since the HIPC decision point in March 2020, we have built up a portfolio of close to $2 billion of committed funds.