Somalia State Building and Resilience Contract

The intervention logic of this action is that if the Somali federal state is increasingly legitimate and capacitated, and that the Somali federal project is consolidated, the government of Somalia will be able to continue on its path of reforms, and thus build a strong track record for international financial institutions (IFIs)' arrears clearance and Highly Indebted Poor Countries Initiative (HIPC) Decision point, as well as be in a position to deliver more services to its population. The overall objective of the Job Compact SRPC is to increase the legitimacy and capacity of the Somali federal state, further the federal project, and create the conditions for inclusive growth. The specific objectives of the action are the reinforcement of trust in the Federal Government of Somalia at three levels: (i) with the Federal Member States (FMS) by reinforcing political and policy links through increased and improved inter - governmental fiscal transfers ii) towards the international creditors and partners in view of building a strong reform track record for IFI arrears clearance and HIPC Decision point, (iii) towards the Somali population by gradually increasing the role of the Somali authorities in the provision of basic services.

A €3 million top-up to this action was approved in December 2018 to provide for accompanying measures in order to support directly the 1st phase of the currency reform in Somalia.

The action's overall amount was increased in February 2020 by another €4.4 million top-up, hereby including support to debt relief.

Main objectives

The specific objectives are the reinforcement of trust in the Federal Government of Somalia at three levels: (i) with the Federal Member States (FMS) by reinforcing political and policy links through increased inter - governmental fiscal transfers ii) towards the international creditors and partners in view of building a strong reform track record for IFI arrears clearance and HIPC Decision point, (iii) towards the Somali population by gradually increasing the role of the Somali authorities in the provision of basic services
The expected results are:
1. Additional fiscal space for priority national development spending, for intergovernmental fiscal transfers- reinforcing links between the FGS and the FMS- and for enhanced macroeconomic stabilisation;
2. Accelerated reform process and improved Public Finance Management and Payment processes for both salary and non-salary recurrent costs and improved budget transparency and accountability;
3. Enhanced Domestic Revenue Mobilisation (DRM) and greater accountability and transparency in the collection of revenues;
4. Accelerated engagement between the FGS and FMS leading to tangible progress on intergovernmental fiscal arrangements;
5. Gradual increase of the role and capacity of the Somali authorities in the service provision, with a focus on law enforcement/policing and education.
Nevertheless, with volatility being one of the key characteristics of Somali politics, the SRBC might indirectly contribute towards a more short term goal of political stabilisation by providing the current administration with more breathing space. Last but not least, this SRBC aims to equally give a political signal, to the IFIs, creditors and other international partners to accelerate their support for Somalia's reengagement process with the IFIs.