World Bank approves $125M grant supporting economic resilience in Somalia

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Ajay Banga 14th President of the World Bank Group | Official Website

NAIROBI, July 30, 2024 — The World Bank’s Board of Executive Directors has approved Development Policy Financing (DPF) that introduces for the first time drought index insurance to 180,000 of Somalia’s pastoralists, including 90,000 women.

The $125 million IDA grant is the first of two operations in a programmatic series aimed at boosting revenue, enhancing debt management and accountability of public spending, and increasing climate-smart private sector investments. The program will facilitate access to microfinance for lower-income groups in Somalia that operate mostly in climate-vulnerable sectors such as agriculture, fisheries, and micro businesses. The DPF also seeks to expand access to greener and more affordable electricity and support fisheries development by tapping into new sources of growth. Resources from the grant will help the government finance essential public services.

“This DPF signals the government’s commitment to continuing important structural reforms following the Heavily Indebted Poor Countries (HIPC) Completion Point, paving the way for a more stable and sustainable future,” said Kristina Svensson, World Bank Country Manager for Somalia.

The reforms supported in this operation complement the World Bank’s broader engagement in Somalia and align with the objectives of the World Bank’s Country Partnership Framework for Somalia (FY24–28). The proposed series is part of the World Bank’s support to help Somalia construct a more stable state, foster inclusive private sector-led growth, and enhance resilience with a long-term view toward restoring social contract and enabling Somalia's emergence from fragility. Achieving these results is closely linked to World Bank’s portfolio and investments by other development partners. Furthermore, this operation aligns with corporate commitments on climate co-benefits, reducing gender gaps, and maximizing finance for development.

The approval comes at a time when Somalia continues to face multiple shocks that reduce economic growth and contribute to widespread poverty. As one of the most exposed countries to climate change impacts globally, projections indicate high certainty for temperature rise in Somalia. Climate change is making periodic droughts and floods more frequent and severe, which is linked to Somalia's social and political vulnerabilities.

“Sustainability of public finances supported by the DPF is critical for ensuring economic resilience. Actions to strengthen domestic revenue mobilization, manage better public debt, and enhance accountability of public spending create building blocks for adequate funding for development and contribute to macroeconomic stability,” said Stella Ilieva, Task Team Leader and Senior Economist.

* The World Bank’s International Development Association (IDA), established in 1960 helps low-income countries by providing grants and low-to-zero interest loans for projects that boost economic growth reduce poverty improve lives IDA is one largest sources assistance its client countries Since provided billion countries Annual commitments averaged about billion over last three years going Africa