Home Venture Capital Somali institutions receive a boost to help country move closer to debt relief

Somali institutions receive a boost to help country move closer to debt relief

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NAIROBI, July 31, 2023 — Somalia’s efforts to build strong institutions have been boosted by a new $75 million grant, the second in a series of two grants that are helping the country move toward relief total and irrevocable debt under the Heavily Indebted Poor Program. Poor Countries Initiative (HIPC).

In a context of multiple and overlapping shocks linked to frequent climatic hazards, as well as generalized fragility, the Somali government is implementing an ambitious reform program to strengthen institutions, attract investments and achieve inclusive economic growth and to job creation, in accordance with the Ninth National Plan. Development plan which defines numerous priority areas to move the country forward, several of which are supported by this Development Policy Financing (DPF).

“This DPF supports the government’s aspirations to lay the foundations of a modern economy with strengthened institutions. It also demonstrates the significant progress Somalia has made in terms of institution building and economic development, paving the way for a more stable and sustainable future,” said Kristina Svensson, World Bank country manager for Somalia.

To develop sectors with high potential for economic growth, Somalia has approved new laws that establish the institutional environment in key sectors such as fishing and electricity. In order to mobilize the private capital essential for the development of these sectors, a new law on investment and investor protection has been promulgated. To increase access to financing, a digital identification law was approved, which can support better know-your-customer protocols, as well as a data protection law to provide guarantees on the use personal data.

The DPF supports the building blocks of harmonized customs regimes across Somalia, which can encourage cooperation, increase trade, increase revenues and simplify procedures for the private sector. Furthermore, as the volume of public resources increases, the DPF supports the strengthening of the external audit function, essential to ensure the use of public funds and build trust between government and citizens in a context of weak governance. Somalia’s substantial economic potential can only be realized with greater stability and better governance arrangements, which can in turn help reduce fragmentation and strengthen the social contract.

Alongside efforts to implement institutional reforms, Somalia has signed debt relief agreements with its major creditors and is holding discussions with some remaining bilateral and multilateral creditors. Despite multiple shocks, Somalia maintains its macroeconomic stability. These institution-building reforms bring Somalia closer to its debt relief goal, which will erase the legacy of loans taken before the civil war, opening a new page in the country’s development trajectory.

DPF resources will help the government ensure essential public spending can be paid for. Over time, strengthening institutions and sustained economic growth can help Somalia build buffers against shocks and build resilience.

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