The state of Somalia collapsed in 1991 following an outbreak of a civil war. By then, Somalia had already fallen under Bank Group sanctions due to unpaid arrears. Bank relations with Somalia were consequently suspended. Since 1991, Somalia has experienced continuous military conflicts among the different warring factions and this has really fragilized the country. The fragility of the Transitional Federal Government of Somalia has been compounded by internal divisions.

In the face of prolonged civil war and the absence of a central government, Somalia’s economy virtually collapsed, in spite of significant economic potential, including large fishery resources along its coast.

In the absence of government services, the private sector has stepped in to provide telecommunication and other services. The growth of the private sector under such difficult institutional and security conditions has been described as ‘truly remarkable.’

The African Development Bank Group has no operations in Somalia, except for emergency grants. Contacts, both formal and informal, have been established with Somalia's transitional government  although no operations have begun.

Bank Grou support to Somalia is guided by its new Fragile States Policy. Bank assistance to Somalia will therefore be determined by progress towards the restoration of security and advancement in the political and national reconciliation process.

Plans are underway for the Bank to prepare a Country Dialogue Note for Somalia in 2009 that will define how it will assist the country's transitional government and define conditions for a full re-engagement and normalization of relations with the country.  In light of the prevailing situation in Somalia, the assistance is likely to be, initially, limited to institutional building in core areas. The support will be geared towards supporting the nascent state building process.

Up to 20 per cent of Somalia’s grant allocation of UA 5 million under the African Development Fund 2008-2010 (ADF XI) allocation is expected to contribute to such capacity building, if  there is progress in conflict resolution.

The Bank  Group is expected to closely coordinate its work in Somalia with the World Bank,  UNDP, and other donors in the development of a framework for coordinated rehabilitation and reconstruction support to Somalia. The timing of the exercise will depend on progress in restoring long-lasting peace and in building core economic institutions and the establishment of a macro-economic programme for support by donors.