Future statebuilding needs to be selective and focus on the most essential structures and functions of the state, given the contestation of state authority and low levels of citizen trust in the Somali government and limited domestic revenue. In the near term, the government should not be expected to grow its public service sector significantly or to provide a comprehensive set of basic services. Statebuilding efforts must continue to be selective, building the most essential structures and functions of the state, and support the core political settlement through its convening, technical assistance, and financing roles. Given the vital role of the private sector in generating jobs and providing basic services, statebuilding efforts should focus on developing the facilitative and regulatory roles of the state related to the private sector.

A continued focus on key areas of statebuilding where the World Bank has already invested would be prudent. This includes attention to core institutions for PFM and economic management, domestic revenue mobilization, and intergovernmental fiscal systems. To ensure program effectiveness, operations should continue to promote reforms and government programs that enhance citizen trust and can contribute to strengthening the social contract relationship between citizens and state. Throughout its service delivery sector portfolio, the promotion of citizen participation and state accountability actions would help achieve the overall goals of statebuilding.

The World Bank can facilitate dialogue and provide technical assistance on federalism and intergovernmental systems in a context where political contestation continues. There is a perception that most of World Bank financing is being channeled through the federal government, which has generated resentment among subnational governments, whose support is critical for building a legitimate state. Absent an agreed federalism framework, the World Bank needs to be mindful that the subsidiary agreements on resource sharing between the federal government and the federal member states in its development programs reflect contemporaneous agreements among key officials at the federal and state levels on how power should be shared in sector programs. Careful monitoring of the differences in such negotiated agreements and their impacts might provide useful technocratic input for political negotiations.

Now that the HIPC Completion Point has been reached, it will be crucial to identify a new framework to sustain momentum on the reform agenda, against which the Bank Group and partners can align financial incentives, investments, and policy dialogue. During the past five years, the HIPC process has strategically anchored the Bank Group’s engagement in Somalia and aligned the efforts of development partners. The prospect of debt relief and increased financing has helped incentivize reforms and strengthened federal government–federal member states relations.

The Bank Group can more effectively engage with the Somali private sector and nonprofit sector for the provision of services and creation of jobs to empower communities. Although it is a priority of its country strategies, the Bank Group’s engagements have not had tangible results in significantly expanding economic opportunities or creating income-generating opportunities for Somalis in an environment of high youth unemployment and a growing youth bulge. For many Somalis, the private and nonprofit sectors are also the sole suppliers of services traditionally provided by the state. However, the World Bank has not significantly leveraged these actors on provision of basic services. This is a missed opportunity to address a driver of conflict while adapting the statebuilding model to Somalia. The Bank Group’s future engagements could explicitly consider the appropriate roles of public versus private service delivery models.

Arrears-related financing limitations forced the Bank Group to adopt a phased and iterative approach. At the program level, the Multi-Partner Fund facilitated coordination among development partners and financed capacity building, enhanced supervision budgets, and third-party monitoring critical to the program’s success. At the project level, the most significant adaptation has been increased reliance on UN-supported implementation. This has allowed the World Bank to expand its reach but raises new trade-offs between short-term delivery needs and longer-term statebuilding objectives.

After the completion of the HIPC process, the World Bank portfolio has been expanding rapidly, allowing it to reach more beneficiaries. The government has successfully managed the growth of the portfolio so far and is proactively upgrading its capacity and coordination mechanisms to meet future demands. Yet the continued rapid growth risks overwhelming the as-yet limited government capacity and existing coordination platforms. High fiduciary and ESF risks demand strong mitigation, but such systems do not offer sufficient operational flexibility for Somalia’s dynamic context, particularly during crisis response. The high cost of operating in Somalia will be challenging under standard IDA arrangements.

Lessons

Somalia has achieved progress in state and institution building and in service delivery, yet significant risks remain. The progress on statebuilding is tenuous and subject to reversals. Given the low delivery of services, the social contract between citizens and the state is weak. As in many FCV contexts, statebuilding is not a linear process and is expected to take time. At present, there is no agreement on a federal constitution, and disputes remain over political and constitutional issues between the federal member states and the federal government on core issues of revenue and resource sharing. The limited fiscal space and capacity of the government is undermining the sustainability of service delivery supported by the World Bank.

The World Bank needs to systematically consider the absorptive capacity of the government when scaling up its portfolio. Too fast an expansion of the lending portfolio risks overstretching client systems and capacity. Future engagements will require selectivity, continued flexibility, a more sustainable approach to funding the cost of operating in FCV environments, and careful consideration of the country’s political economy and absorptive capacity. The evaluation offers four lessons for the new Somalia country program and potential broader applicability to Bank Group engagement in FCV countries:

1. Selectivity in statebuilding support. Somalia’s limited fiscal space and the contested authority of the state require selectivity in the World Bank’s support for expanding public services. Fiscal planning needs to consider the medium- to long-term future of development partner financing, including the importance of trust funds. Growing the authority of the Somali state will require a gradual expansion of services that considers long-term sustainability, focusing first on the most essential structures and functions. Budget support for statebuilding should be accompanied by transition arrangements to avoid indefinite funding of unsustainable services.
2. Calibrating lending with absorptive capacity. With the availability of enhanced IDA resources, the World Bank needs to calibrate the growth of its lending portfolio with the capacity of the government. The deliberate phased and incremental approach to engaging in Somalia—involving piloting, testing, and careful scaling up based on robust monitoring of project outputs and course correction where needed—was appropriate for the country’s context. It was effective and helped overcome Somalia’s significant capacity challenges. With the availability of enhanced IDA financing, the expansion of the Somalia portfolio needs to be mindful of client capacity and sustainability, including through continued capacity building of relevant state institutions. Corporate incentives to increase lending volumes without regard for the fragile situation in Somalia risks overwhelming government absorptive capacity.
3. Strategically engaging different government entities. The design of the World Bank lending program should more explicitly consider the incentives and needs of different government stakeholders at the level of the federal government and the federal member states to minimize tensions that may undermine statebuilding objectives. The perception that the World Bank’s financing and approach is favoring the federal level can lead to increased tensions between the federal government and the federal member states and undermine the political statebuilding process between them. Balancing the needs of the political process requires flexibility, astute political economy analysis, and its integration in programming.
4. Maintaining partnerships and coordination. Leveraging partnerships and coordination of development assistance remains critical in the post-HIPC environment to anchor reforms and the statebuilding agenda. Deliberate engagement with development partners has helped reinforce incentives for reforms. The Multi-Partner Fund facilitated coordination with donors to avoid fragmentation. This partnership between IFIs and development partners facilitated agreement on comprehensive HIPC Completion Point triggers. Even though the Multi-Partner Fund is no longer the main source of project financing, continued coordination across IFIs, including on priorities for sector support, will be essential to focus the government’s limited capacities on coherent and feasible policy reforms and avoid fragmentation of support.