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Somalia, EU sign €100m direct budget support pact

Storyline:Business, National News
Prime Minister Hassan Khaire (L) and EU Commission Director-General for International Cooperation and Development, Stefano Manservisi during the signing of the €100 million agreement in Mogadishu. Photo: Goobjoog News|Oct 14, 2018

By T. Roble

The European Union will inject close to €100 million into Somalia’s national budget over the next two and half years, an agreement signed between the two parties today in Mogadishu states.

The EU said in a statement following the signing ceremony that up to €92 million will go to the federal government through budget support while the remaining €8 million will support capacity building to the federal and states’ governments and oversight institutions.

The signing ceremony between Prime Minister Hassan Khaire and European Commission’s Director-General for International Cooperation and Development, Stefano Manservisi follows an earlier direct budget support pledge by the EU, the first in 30 years. The EU has however been providing financial support to Somalia through the World Bank run Multi-Partner Fund.

Speaking during the event, Prime Minister Hassan Khaire said today’s signing capitalizes on the positive track record of Somalia. “Today, the European Union is taking one crucial further step: it is engaging with the Federal State of Somalia in its first fully-fledged budget support operation,” the PM said. “This operation is due to deliver EUR 100 million straight into the national budget over more than two years, and support capacity building.

He warned however challenges abound which call for commitment from both the federal states and the federal government. This he noted include fiscal federalism reforms, revenue mobilization and currency reform.


The disbursement of funds will be sequenced and closely monitored through political dialogue, regular assessment of progress achieved against indicators and dedicated safeguard measures, the EU Commission said.

The date of signature coincides with the first anniversary of Somalia’s worst terror attack, which killed over 500 people in Mogadishu.

EU Commissioner for International Cooperation and Development, Neven Mimica said today’s signing is indicative of the bloc’s trust in Somalia’s institutions. “Budget support shows the EU’s trust in Somali institutions. It gives the Government resources to implement reforms and build a stronger State able to deliver basic services to its people,” Mimica said. “Those 100M€ show the EU delivers quickly, a few months after the Somali Partnership Forum. It comes at a time where the Horn of Africa is going through unprecedented changes. And Somalia can seize this momentum for its own domestic transformation.”

The new agreement follows last month’s World Bank approval of Somalia to access pre-arrears clearance through the International Development Association, a part of the World Bank which provides grants and low interest loans to poor countries.

The direct budget is indicative of donor confidence in management of public funds. According to the Financial Governance Committee, as of the first quarter of 2017, overall aid flows to Somalia in the preceding three years amounted to $5.4 million. A paltry 3% or $158 million of this went directly to the federal government owing to among others fiduciary risks.

The Committee urged the Federal Government to aim at a 15% direct donor injection from the current 10%.