Twenty seven years after it initially suspended ties with Somalia, the World Bank has approved $80 million in grants to fund public finance reforms in the country. According to the bank, the grant is the first disbursement to the Somali government in 30 years.
A statement by the World Bank said that the $80 million include financing of $60 million for the Recurrent Cost and Reform Financing Project, and $20 million for the Domestic Revenue and Public Financial Management Capacity Strengthening Project. Both projects, the lender said, represent a milestone in Somalia’s development and reconstruction.
The World Bank had in 1991 suspended ties with Somalia when war broke out in the country. However, in 2003, the lender resumed support, focusing only on HIV/AIDS and livestock programmes, in partnership with other organisations. Direct ties with the Somali government resumed in early 2013.
Under a programme called Country Partnership Framework, the World Bank will also work with the Somali government to improve services like education and healthcare, access to clean water, energy and finance.
Somalia has over the past decades suffered conflicts and insurgency by al Qaeda-linked al Shabaab, among other challenges such as famines and piracy. While international agencies such as the World Bank cut ties, the country survived on remittances from its citizens in the diaspora. According to the World Bank, remittances in 2015 were estimated to reach a total of $1.4 billion in Somalia, supporting 23 percent of the country’s GDP.
However, things went bad, as many banks in the United States, United Kingdom, Canada and Australia closed the bank accounts of Somali remittance companies for fear of money laundering and potential links to terrorism. In 2015, an American bank that handled up to 80 percent of remittances from the United States also ended its partnership with Money Transfer Operators (MTOs) serving Somalia due to new money laundering regulations introduced at the time. However, in 2016, the World Bank moved to help the East African country, and started working with the Somali government to support the flow of remittances to Somalia.
The Washington-based lender worked alongside the Central Bank of Somalia (CBS) to implement a number of activities aimed at tackling major deficiencies in the Somali financial sector affecting remittance flows to the country. Hence, it appointed Abyrint AS, a management consulting firm specialized in post-conflict states, to act as the “Trusted Agent” to the CBS and assist the authorities in comprehensively regulating and supervising money transfer businesses. The “Trusted Agent”, in collaboration with the CBS, conducts on-site and off-site supervision on registered and licensed money transfer businesses.
The World Bank has continued to support Somalia, as the country works its way back to socio-economic stability. The International Monetary Fund said it expects the Somali economy to grow by 3.1 percent this year from 2.3 percent in 2017. The country’s economy is also forecast to grow by an average of between 3.5 and 4.5 percent annually in 2019-2022.