A Bank grants Somalia $25M to bolster budget for COVID-19 response

Abidjan, Cote d’Ivoire - The African Development Bank approved grants worth $25.1 million to Somalia to bolster the national budget for government efforts to mitigate national and regional impacts of the COVID-19 pandemic.

The funding comprised of a $10.04 million grant from Pillar 1 of the Bank’s Transition Support Facility and a $15.06 million grant from the Regional Operations Envelope, comes under the umbrella of the Bank’s COVID-19 Response Facility.

“It is the first time the Bank is leveraging the Regional Operation Envelope resources for a Budget Support Operation. This approach was pertinent to ensure that Somalia has adequate resources to contain the spread of the disease in its territory and limit cross-border impacts that pose serious risks for health, social and economic development for the Horn of Africa sub-region,” said Acting Bank Director General for East Africa, Nnenna Nwabufo.

The Somali government will use the financing to carry out three interlinked responses to the COVID-19 pandemic that will enhance the health system; safeguard livelihoods and social protection; and support labor force productivity and economic activity.

Health-sector interventions include increasing the country’s ICU capacity, boosting infection prevention and control measures, and widening the provision of personal protective equipment. Social protection measures include provision of nutrition-linked cash transfers and compensation for those engaged in livestock markets, as well as programs to offer temporary tax and customs duty relief, and 50% relief on staple food, including cooking oil and flour.

Among initiatives aiming to support the workforce and economy are the establishment of a financing facility to support micro, small and medium enterprises; the introduction of permanent tax and customs increases on tobacco, beauty products, and plastic bags; and advancement of certification procedures for job-creating local production of COVID-19 supplies.

Somalia recorded its first COVID-19 case on 18 March and reacted by suspending non-essential business and social activities, closing off air and sea connections except for goods, and introducing partial curfews and lockdowns.

The crisis has placed the country’s recent socio-economic progress in jeopardy and increased its susceptibility to political instability and climate-induced shocks. The Horn of Africa region has also experienced swarms of locusts over the past year that have increased food insecurity.

Under a worst-case scenario, Somalia’s real GDP is forecast to contract by 5.4% in 2020 and inflation to hit 6.3% as imports decrease.

The Bank’s grant funding aligns with Somalia’s development objectives and COVID-19 preparedness and response plans. The intervention also aligns with the Bank’s Ten-Year Strategy, and it's Eastern Africa Regional Integration Strategy and broader efforts to combat fragility and build resilience in Africa.