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EU approves first ever €100m budget support for Somalia

Storyline:Business, National News

The approval comes a day after the World Bank endorsed $80 million grant for Somalia

Fulgencio Garrido Ruiz, EU Deputy Ambassador to Somalia (left) poses for a photograph with the Prime Minister of Somalia, Hassan Ali Khaire at a ceremony to mark European Union Day in Mogadishu on May 09, 2018. AMISOM Photo / Ilyas Ahmed

By T. Roble

The European Union (EU) has approved €100 million direct budget support to Somalia, its first ever a day after the World Bank approved $80 million grant to the Horn of Africa country in 30 years.

The EU said Wednesday the funds which will be disbursed from next month through to 2021 will be instrumental in fostering federalism in Somalia and enabling government’s delivery services to citizens.

“With this budget support operation (also called State Building and Resilience Contract in Somalia), the European Union aims to support federalism in Somalia through increased and improved inter-governmental fiscal transfers from the Federal Government to its Federal Member States,” the EU said in a statement.

The funds, the EU bloc added ‘will also reinforce the social contract between the Federal Government and the Somali population by gradually increasing the role of the Somali authorities in the provision of basic services.’

The approval of the funds follows EU’s pledge during the London Conference last May.

The approval of the funds signals confidence by the EU in Somalia’s ability to put in place safeguards to minimize fiduciary risks. Donors including the EU have channeled millions of dollars to Somalia through third party avenues such as the World Bank’s Multi Partner Fund and local and international Non-Governmental Organisations owing to lack of trust in government’s ability to effectively manage the funds.

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The statement noted the approvals by both World Bank and EU ‘opens entirely new opportunities in Somalia’s state- and nation‑building.”

“It will contribute to foster greater standards of governance and accountability from the Federal Government and Federal Member States,” the statement added.

According to the Financial Governance Committee report April 2017, overall aid flows to Somalia which include humanitarian aid, peacekeeping and development assistance amounted to $5.4 million in the preceding three years. Out of this, only $158 million or just 3% was channeled to the Federal Government.

The Committee advised the government to set an ambitious 15% direct budget financing.

The World Bank this week approved Somalia’s access to the International Development Association’s Pre-Arrears Clearance financing which enables the country access grants to fund economic recovery projects and bolster domestic revenue collection.