This evaluation assesses the World Bank Group’s support to Somalia between FY 2013 and FY23. It reviews the extent to which the Bank Group prepared for regularizing relations with Somalia and customized its support to align with the country’s severely fragile situation and strategic objectives. It covers the decade since the Bank Group reengaged in 2012 and spans two country strategies. It informs the new Bank Group Country Partnership Framework for Somalia and has potential broader applicability for other engagements in fragile and conflict situations. In this evaluation, we address three questions: (i) to what extent the Bank Group has adapted its support to Somalia’s evolving development challenges, risks, and fragile context; (ii) to what extent the Bank Group has contributed to building the capacity of the state to support Somalia’s longer-term development, including for managing the government’s resources and delivering services; and (iii) to what extent the Bank Group’s modalities of engagement were appropriate for Somalia’s situation of fragility and conflict.

In 2012, Somalia was considered a failed state characterized by multiple, protracted, and deeply rooted fragility and development challenges. After a decades-long civil war and recurrent droughts and floods, much of Somalia’s human and physical capital had been destroyed, and a new government was struggling to establish basic state structures and control over its territory. Today, Somalia continues to be affected by numerous development constraints, including a continuing civil conflict and a still-evolving political-constitutional structure, and extreme poverty and susceptibility to climate change and natural disasters. It remains one of the poorest and most fragile countries in the world. The Federal Government of Somalia’s authority is contested, and it has limited state capacity.

World Bank Group Strategies Have Built Partnerships to Support Somalia’s Transition

The Bank Group’s engagement in Somalia was guided by the New Deal Compact for Somalia (2013) and enabled by the establishment of the Federal Government of Somalia. The compact involved a new political, security, and development framework and paved the way for coordinated engagement with development partners and international financial institutions. The compact was anchored in the Federal Government of Somalia’s five Peacebuilding and Statebuilding Goals: (i) legitimate and inclusive politics, (ii) security, (iii) justice, (iv) economic foundations, and (v) revenue and services.

The Bank Group’s reengagement with Somalia was enabled by development partners and their funding. Because of Somalia’s arrears to the International Development Association (IDA) and other international financial institutions, the World Bank was unable to lend directly to the country during the initial phase of engagement (FY13–19), but it mobilized development partners’ resources through the World Bank–administered Multi-Partner Fund established in 2013. The Multi-Partner Fund was critical for the Bank Group’s reengagement and facilitated coordination among development partners.

Somalia successfully normalized its relationship with international financial institutions in 2023, with World Bank financing support and assistance, which was closely coordinated with the International Monetary Fund and other partners. Somalia cleared its arrears to achieve IDA eligibility in 2020, when it reached most of the required milestones for the Completion Point for Heavily Indebted Poor Countries. It met the Completion Point in late 2023, which enabled it to rejoin the global financial system after more than 30 years. The Heavily Indebted Poor Countries process has been effective in encouraging Somalia’s federal government and federal member states to agree on critical issues and reforms supported by the World Bank.

The Bank Group’s two strategies—an Interim Strategy Note covering FY14–16 and a Country Partnership Framework covering FY19–23—were relevant and appropriate to Somalia’s development and fragility challenges. They allowed the Bank Group to engage in a severe fragility, conflict, and violence (FCV) environment. The Bank Group prioritized assistance to institution building and citizen-centric service delivery in the immediate reengagement. In so doing, it operated in line with the objectives of the government and development partners and with its own analytic work and comparative advantage. Building institutions and capacity were critical prerequisites for engaging in other priority areas. The country strategies also anticipated supporting job creation and economic opportunities, which have yet to see greater engagement by the World Bank.

During the FY13–23 review period, the World Bank delivered $2.54 billion in financing through 53 operations. Annual lending volume rose from an annual average of $69.1 million to $513.5 million between FY13–19 and FY20–23, after IDA resources became available subsequent to the clearance of arrears. The portfolio started with a focus on improving public sector governance and gradually expanded to include citizen-centric projects. The International Finance Corporation’s support in Somalia focused mostly on advisory services, supporting investment climate reforms and institutional capacity building. However, its engagement remained limited compared with expectations.

The Bank Group strategies performed well in achieving their state- and institution-building objectives. The strategies have helped build country systems and capacity and have supported Somalia’s social safety net. Looking ahead, the government and all development partners will need to invest more effort into achieving results in promoting growth and economic opportunities.

World Bank Contributions to Statebuilding Have Been a Critical Enabler

The World Bank has been a critical enabler for statebuilding and was the lead agency for strengthening governance systems and capacity in Somalia’s fragility context. The World Bank supported the statebuilding agenda by strengthening core governance systems and capacity, consistent with Somalia’s development priorities. It prioritized the Peacebuilding and Statebuilding Goals agreed with donors in the Somalia New Deal Compact, including building basic institutions and administrative capacity, developing revenue mobilization capacity, supporting intergovernmental relations, and building service delivery systems. The World Bank dedicated significant financial resources—totaling $469.4 million in FY13–22—and analytic and advisory services to building state capacity and institutions. International Finance Corporation advisory services also supported capacity building of institutions and the regulatory framework to improve the business environment, including support for the Company Law, a company registry, and a framework for public-private partnerships.

The World Bank’s statebuilding interventions in Somalia were relevant. We considered three dimensions for relevance—alignment with the Peacebuilding and Statebuilding Goals, addressing critical statebuilding needs, and identification of gaps in interventions. The lending and advisory activities of the country program aligned well with the Peacebuilding and Statebuilding Goals and their focus on revenue and services in addition to economic foundations, and, to a lesser degree, they considered inclusive politics. The World Bank portfolio dedicated to statebuilding targeted critical needs, including building public financial management (PFM), increasing domestic revenue mobilization, developing public administration capacity, and funding some core government functions. Furthermore, the World Bank’s diagnosis of security sector expenditures was highly relevant but was followed up with limited operational support.

Considering the challenging circumstances, the results of the World Bank’s contributions to statebuilding in Somalia have been commendable. The Somali state has been transformed over the past decade. Given the challenging starting point, the portfolio has had mixed results, with higher performance for operations focused on improving PFM, some traction in developing an intergovernmental fiscal system, and weaker performance for engagements to increase domestic revenue mobilization.

The World Bank’s support to building public administration capacity, particularly through PFM interventions, established new systems, increased accountability and transparency, and improved human resource capacity. The World Bank’s support also helped establish core laws, policies, and systems for economic management and service delivery, although evidence of their effective implementation is lacking. Regarding support to building the capacity for domestic revenue mobilization, although revenue mobilization has improved over the past decade, at 3 percent of GDP, it remains inadequate to support core state functions. World Bank support has contributed to the adoption of policies and improved systems for customs and inland revenue, reducing the government’s dependence on trade taxes. Support for building an intergovernmental fiscal system had some tangible progress in developing a system between the federal government and federal member states, but this has been constrained by ongoing disputes over the political-constitutional relationship between the federal government and federal member states on resource sharing.

Country program features contributed to the effectiveness of World Bank support to state- and institution-building. They included the approach of (i) programmatic deployment of PFM reforms; (ii) the use of the government’s own country systems to channel Recurrent Cost and Reform Financing support as these country’s systems were being built, rather than channeling resources through project implementation units; and (iii) procurement risk mitigation through technical assistance to the Financial Governance Committee. The Recurrent Cost and Reform Financing instrument has been an effective and context-appropriate tool to provide simultaneous budget and capacity-building support, based on disbursement-linked indicators targeting both the federal government and federal member states. Since Somalia achieved IDA eligibility (2020), the World Bank has shifted toward policy-based lending.

The Heavily Indebted Poor Countries process has been effective in encouraging the federal government and federal member states to agree on a range of issues related to fiscal federalism and other reforms supported by the World Bank. Now that the Heavily Indebted Poor Countries Completion Point has been reached (December 2023), a new framework to anchor the statebuilding agenda is needed.

However, the sustainability of the World Bank’s statebuilding interventions in Somalia faces significant risks. To address sustainability risks, the World Bank program design focused on increased capacity and intentionally used the government’s own country systems for providing support while putting in place guardrails on PFM and procurement. But significant risks remain, related to the turnover of high-level government staff and heavy reliance on technical assistance funded by development partners.

An assessment of higher-level outcomes of statebuilding support in Somalia indicates that progress remains tenuous and subject to reversals. Although great strides have been made over the past decade in building institutions and a federal structure, progress is not yet evident in higher-level governance indicators. The nature and functions of the Somali state are fluid, and statebuilding is a work in progress that will require persistent engagement and time. The continuing FCV situation in Somalia renders progress fragile. Institutions remain weak, and the perception of trust in institutions has improved little. The sustainability of some achievements is at risk, and future lending will need to carefully consider the country’s political dynamics.

Support to Service Delivery Needed to Be Selective, Although Concerns Remain over Sustainability

The World Bank’s support to service delivery to citizens has been relevant for the success of statebuilding. It helped demonstrate the ability of the government to succeed as the credible provider of state functions. Citizen-centric programs focused mainly on water and rural resilience, urban resilience, and a shock-responsive social safety net program, and less on health and education.1 The use of trust funds enabled the World Bank to pilot and test the design of the water and rural resilience and the urban resilience programs, which were scaled up when Somalia became eligible for IDA financing.

Projects supporting service delivery objectives have mostly achieved their overall project objectives. These projects have built capacity for service delivery among government implementing agencies at the federal and state levels and among municipalities. Projects supporting the Baxnaano safety net program have benefited an estimated 1.6 million people in Somalia by targeting vulnerable groups, including poor people and rural and farming communities, with a strong focus on female beneficiaries. However, the projects do not provide evidence about higher-level outcomes for access to health and education services or for avoidance of displacement of rural households.

Crisis response funds allowed the World Bank to scale up existing mechanisms for urban and social protection programs and to disburse cash to vulnerable populations affected by disasters and crises such as locusts and floods. The World Bank support financed a response to and recovery from locust infestation, flooding, and the COVID-19 pandemic. Through Baxnaano, it benefited an additional 1.6 million Somalis affected by the locust emergency. It also demonstrated the World Bank’s responsiveness, blending a focus on long-term development with short-term emergency financing when needed.

The sustainability of the social safety net program Baxnaano is uncertain. An estimated 14 percent of the government’s budget was allocated to safety net payments, which is not sustainable given low domestic resource mobilization. The expectation of development partner grant support to cofinance this World Bank–supported government program appears unrealistic, putting at risk the program’s sustainability.

The World Bank can engage more effectively with the active Somali private sector and nonprofit sector for the provision of services and to help create jobs and empower communities. While engagement with nonstate actors and international nongovernmental organizations occurred as part of third-party implementation, the evaluation did not find a systematic effort to leverage nonstate actors for providing basic services in the country. For many Somalis, the private and nonprofit sectors are the sole suppliers of basic services in health and education, traditionally provided by the state. These arrangements have grown in the absence of the state’s capacity to deliver such services and the continuing perceptions of weak government authority. Although the World Bank has engaged with other United Nations agencies, its engagement with the private sector or the nonprofit sector on the provision of basic services and to directly support income-generating opportunities has been more limited. This is a missed opportunity to address drivers of conflict while supporting statebuilding in Somalia.

World Bank Group Modalities Have Adapted to Maintain Relevant Engagement

The Bank Group’s engagement has been well adapted to the FCV context, the institutional capacity, and the financial constraints of Somalia. The phased approach has been well suited to overcoming Somalia’s limited capacity, allowing for a gradual expansion of the portfolio to eventually include citizen-centric engagements. This deliberate iterative approach, involving piloting, testing, and careful scaling up based on robust monitoring and the ability to course correct, was appropriate, effective, and essential for adapting to the highly dynamic context of Somalia. Arrears clearance has removed the initial financing constraints, and the portfolio has increased significantly. Rapid portfolio growth, however, may risk overwhelming government absorptive capacity.

Many projects deployed adaptations to FCV challenges, such as the Recurrent Cost and Reform Financing series and the use of a third-party monitoring agent. The Recurrent Cost and Reform Financing was one adaptation to combine needed funding for the incipient government with disbursement-linked indicators that supported reforms and capacity building. A third-party monitoring agent was critical to collecting project data. Overall, 67 percent of lending projects were designed with adaptations to mitigate conflict risks and overcome conflict-related risks to achieving project objectives, including specific implementation modalities with United Nations agencies and nongovernmental organizations, or by incorporating beneficiary feedback. Challenges remain, however, including limited client capacity, implementation challenges for the Environmental and Social Framework, high fiduciary risks that demand strong mitigation, and a lack of identifying and capturing FCV-specific indicators across the portfolio.

Overall, the World Bank’s adaptations to fragile contexts in Somalia have been effective in addressing the challenges posed by its FCV environment. The pragmatic application of Operational Policy 7.30 avoided a complete disengagement in 2021–22, demonstrating the flexibility and adaptability of the World Bank’s operating model in response to the complex situation in Somalia. Continued flexibility in policies and processes and a more sustainable approach to financing and operating in fragile contexts could help ensure long-term success and impact.

The Multi-Partner Fund for Somalia has been instrumental in facilitating coordination among development partners and financing the capacity building, enhanced supervision budgets, and third-party monitoring that have been critical to the program’s success. The fund has provided supplemental funding for project supervision and third-party monitoring, in addition to coordinating programs among partners. Additionally, the use of United Nations–supported project implementation has expanded the Bank Group’s reach and helped overcome implementation challenges.

However, the Bank Group’s operating model has been heavily dependent on Multi-Partner Fund financing for operating in Somalia. This reliance on external financing highlights the need for a sustainable and long-term funding approach to operating in fragile contexts.

Lessons

The Bank Group’s strategy and engagements over the past decade have relevantly and appropriately addressed key development constraints in Somalia. The Bank Group has also effectively adapted its operating model to the challenges posed by the severe FCV environment and weak government capacity. The World Bank’s support has contributed to many achievements in building and strengthening institutions and building capacity for service delivery, but enormous challenges remain.

Notwithstanding Somalia’s achievements in state and institution building and service delivery, significant risks remain. The nature and functions of the Somalia state remain fluid, and statebuilding is a work in progress. The government continues to be constrained by low domestic resource mobilization. The capacity of institutions remains weak, and the ability of the state to deliver basic services, including security, health, and education, is limited. Given the low level of service delivery, the social contract between citizens and the state remains weak. Overall, the progress in statebuilding is tenuous and there is a risk of reversals.

The Bank Group needs to systematically consider the incentives and absorptive capacity of the government when scaling up its portfolio. The limited fiscal space and capacity of the government is undermining the sustainability of service delivery supported by the Bank Group. Too fast an expansion of the lending portfolio risks overstretching the government’s systems and capacity and may exacerbate risks. Future engagements will require continued selectivity, flexibility, a sustainable approach to funding the cost of operating in FCV environments, and careful consideration of the country’s political economy and absorptive capacity.

This evaluation offers four lessons:

• 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 state services. Growing the authority of the Somali state will need a focus on the most essential functions of the state and a gradual expansion that considers long-term sustainability.
• Calibrating lending with absorptive capacity. With the availability of enhanced IDA resources, the World Bank should calibrate the growth of its lending portfolio with the absorptive capacity of the government, for example, through an incremental phased approach of piloting and then scaling up successes while closely monitoring implementation.
• Strategically engaging with 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 federal and subnational levels to minimize tensions that may undermine statebuilding objectives.
• Maintaining partnerships and coordination. In the post–heavily indebted poor country environment, leveraging partnerships and coordination of development assistance remains critical to anchor reforms and the statebuilding agenda. Even though the Multi-Partner Fund is no longer the main source of project financing, continued coordination among international finance institutions will be essential to focus the government’s limited capacity and avoid fragmentation of support.