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Thursday, February 22, 2024

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    With the help of a new $75 million grant, Somalia’s attempts to create solid institutions are strengthened.

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    Somalia’s efforts to strengthen institutions have been bolstered by a new $75 million grant, the second in a series of two awards that are assisting the government in its quest to qualify for complete and irreversible debt reduction under the Heavily Indebted Poor Countries (HIPC) Initiative.

    In the face of multiple and overlapping shocks from frequent climatic hazards, as well as widespread fragility, the Somali government is implementing an ambitious reform programme to build institutions, attract investments, and achieve inclusive economic growth and job creation. This is in line with the ninth National Development Plan, which outlines numerous priority areas for moving the country forward, several of which are supported by this Development Policy Financing (DPF).

    “This DPF supports the government’s aspirations to build the foundations of a modern economy with strengthened institutions. It also signals 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.

    Somalia has enacted new legislation to construct the institutional environment in critical sectors such as fisheries and power in order to foster high-potential sectors for economic growth. A new investment and investor protection law was created to mobilise much-needed private money to boost these sectors. A digital identity legislation, which can promote stronger know-your-customer processes, was authorised to enhance access to financing, with a data protection law, which provides protections on the use of personal data.

    The DPF supports the foundational elements of Somalia’s harmonised customs regimes, which may foster collaboration, enhance commerce, raise revenues, and simplify procedures for the private sector. Furthermore, as the amount of public resources grows, the DPF promotes the growth of the external audit function, which is vital for preserving public money and fostering confidence between the government and citizens in a situation of poor governance. Somalia’s significant economic potential will be realised only with increased stability and stronger governance arrangements, which will help minimise fragmentation and reinforce the social contract.

    Somalia has negotiated debt reduction deals with key creditors and is in talks with several remaining bilateral and multilateral creditors, in addition to attempts to complete institutional reforms. Despite several shocks, Somalia’s macroeconomic stability remains intact. These institution-building measures move Somalia closer to debt relief, which will erase the legacy of loans contracted before to the civil war, ushering in a new chapter in the country’s growth trajectory.

    Resources from the DPF will assist the government in meeting critical public expenditures. Over time, institutional development and sustained economic growth can help Somalia establish shock buffers and enhance resilience.

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