Somalia Reengagement and Reform Development Policy Financing

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This Program Document proposes a Reengagement and Reform Development Policy Financing (DPF) for the Federal Republic of Somalia in the amount of US dollar 420 million from International Development Association (IDA) grant resources. The objectives of the proposed DPF are to facilitate full normalization of relations with the World Bank Group (WBG) and support Somalia’s economic recovery through policy reforms that strengthen fiscal management and promote inclusive private sector-led growth. Up to SDR 271.2 (up to US dollar 375 million equivalent) of the proposed grant will be disbursed to the bridge-loan creditor assisting with arrears clearance (‘Portion A of the Financing’); and SDR 32.6 million (US dollar 45 million equivalent) will be disbursed to the Federal Government of Somalia (FGS) as budget support to meet cash flow needs after Somalia has cleared its arrears to IDA (‘Portion B of the Financing’). The DPF complements a rapidly expanding engagement to build human capital and strengthen resilience to climate change and other shocks. In FY2020, the World Bank is currently delivering technical assistance to develop livestock insurance, a major Urbanization Review, and upstream analysis on health and education that are expected to inform new financing. The DPF also addresses the above challenges by enabling full reengagement with the WBG. The DPF will facilitate Somalia’s clearance of arrears to IDA, which is a requirement to qualify for international debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative. Full reengagement with the international community through the HIPC process is expected to enable Somalia to access the financial and technical support the country needs for sustained poverty reduction and inclusive economic growth. Normalization of Somalia’s relationship with IDA would give the government’s access to financing from IDA’s Crisis Response Window, Regional Window, and Window for Host Communities and Refugees. Normalization is also a prerequisite for the International Finance Corporation (IFC) to make investments in Somalia’s private sector.