AfDB approves a $2m grant for Somalia

24/11/2009
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Tunis, 24 November 2009 – After decades of interruption, Somalia re-established its relationship with the African Development Bank (AfDB) on Monday, 23 November 2009 with the signing  of a USD 2 million grant to provide financial and technical assistance to Public Financial Management.  The support to the Transitional Federal Government of Somalia comes from the Fragile States Facility (FSF) administrated by the Bank’s Fragile States Unit.

The grant will also help the country establish sound and transparent public financial systems and develop an appropriate legal framework for fiscal and monetary institutions as well as human and institutional capacity.

Addressing the Deputy Prime Minister and Minister of Finance of Somalia, Mr. Hassan Cheikh Issak who signed the agreement for his country, Mr. Nono Matondo-Fundani, Country Director for Somalia, representing Sector Operations Vice President, Kamal el Kheshen, said that the Bank “congratulates the Government of Somalia for ensuring that all government institutions are now based in Mogadishu, the formulation of a national plan and the establishment of a functional Central Bank and effective anti-corruption commission”.  Mr. Matondo-Fundani added that the Bank appreciates Somali government efforts to normalize the security situation.

“We were an active member of the African Development Bank before, and we are excited to be back in business with the Bank.  We can assure the Bank that we will make good use of the $US 2 million grant to strengthen our financial sector and my government is committed to transparency and accountability,” Mr. Hassan told Bank President,  Donald Kaberuka, in an earlier meeting.

For her part, the Head of the Bank’s Fragile States Unit,  Margaret Kilo, said “Today’s signing ceremony is a momentous event and a first step towards Somalia reengaging with the Bank after nearly two decades. “The Bank is committed to accompanying the government through the process of reengagement,” Mrs. Kilo added.

Somalia has been under sanctions with the Bank Group since the early 1990s when it started accumulating arrears on its loans repayments. Although the Bank had suspended its operations in the country because of the sanctions, it remained engaged in the provision of humanitarian assistance.

Given Somalia’s complex political volatility, its prevailing fragile security situation and the deteriorating social and economic situation, there is currently no clear solution to the country’s arrears problem. To date, the most feasible option for the Bank’s engagement in Somalia is through the Fragile States Facility (FSF) which provides financial resources to Bank Group Regional Member Countries under sanctions.

In October 2009, following the government’s request to the AfDB to assist in rebuilding financial management, the Bank approved a grant of US$ 2 million from the Targeted Support Window of the FSF. This window is designed to provide targeted support for technical assistance and knowledge management.

The Transitional Federal Government is the internationally recognized government of Somalia. The country currently faces several complex constraints and challenges, among which are the urgent need for humanitarian assistance, weak governance, eroded state organs, low government capacity, and a pronounced lack of capacity to deliver basic social services.

Somalia is defined as a Least Developed Country and is one of the ten poorest countries in the world. About 60% of Somalia’s economy is based on agriculture.

Economic progress in Somalia is mixed. Somalia is a fragile state with hundreds of thousands of refugees due to massive floods and the latest fighting in the country’s civil war. Due to the lack of government oversight and data, and the recent war, it is difficult to get an accurate picture of the country’s economic situation.

* 1 UA (Units of Account) = USD 1.59 as at 23/11/2009