Economic situation Dependent on international support
Although the economic impacts of the COVID-19 pandemic were clearly felt by the population, increased international assistance and a rise in remittances from Somalis living abroad meant that they were partially cushioned. For example, funding for a cash transfer programme that gives poor households support for buying food was increased, and a credit programme for small and medium-sized enterprises supported by the World Bank was expanded.
Affected by multiple crises
Based on gross domestic product, in 2021 Somalia was the third-poorest country in the world (after Burundi and South Sudan). In international assessments of its business climate, Somalia regularly lands on one of the last places. The poor security situation, corruption and crime, a weak administration and the lack of a legal framework deter potential investors. The entire Somali economy is highly dependent on international support.
Besides the difficult political situation, further crises are hampering the country’s development. Following devastating floods and a plague of locusts in 2020, the country is now suffering from the worst drought in four decades (see also Social situation). Somalia is one of the countries in Africa that are worst affected by natural disasters and the impacts of climate change.
Qualified for debt relief initiative
Somalia did achieve one important success in 2020: after the government had launched ambitious economic and financial reforms, the World Bank and the IMF approved Somalia’s participation in the Heavily Indebted Poor Countries Initiative (HIPC). The process is due to be completed in 2023 and will give the country the option to use funds that are freed up for measures to reduce poverty instead.
As at: 16/08/2022