African Development Bank Grants of $25 Million Will Bolster Budget for Covid-19 Responses

24 July 2020
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African Development Bank (Abidjan)

The African Development Bank today approved grants worth $25.1 million to Somalia to bolster the national budget for government efforts to mitigate national and regional impacts of the COVID-19 pandemic.

The funding, comprised a $10.04 million grant from Pillar 1 of the Bank's Transition Support Facility and a $15.06 million grant from the Regional Operations Envelope, comes under the umbrella of the Bank's COVID-19 Response Facility.

"It is the first time the Bank is leveraging the Regional Operation Envelope resources for a Budget Support Operation. This approach was pertinent to ensure that Somalia has adequate resources to contain the spread of the disease in its territory and limit cross-border impacts that pose serious risks for health, social and economic development for the Horn of Africa sub-region," said Acting Bank Director General for East Africa, Nnenna Nwabufo.

The Somali government will use the financing to carry out three interlinked responses to the COVID-19 pandemic that will enhance the health system; safeguard livelihoods and social protection; and support labour force productivity and economic activity.

Health-sector interventions include increasing the country's ICU capacity, boosting infection prevention and control measures, and widening the provision of personal protective equipment. Social protection measures include provision of nutrition-linked cash transfers and compensation for those engaged in livestock markets, as well as programs to offer temporary tax and customs duty relief, and 50% relief on staple food, including cooking oil and flour.

Among initiatives aiming to support the workforce and economy are establishment of a financing facility to support micro, small and medium enterprises; the introduction of permanent tax and customs increases on tobacco, beauty products, and plastic bags; and advancement of certification procedures for job-creating local production of COVID-19 supplies.

Somalia recorded its first COVID-19 case on 18 March and reacted by suspending non-essential business and social activities, closing off air and sea connections except for goods, and introducing partial curfews and lockdowns.

The crisis has placed the country's recent socioeconomic progress in jeopardy and increased its susceptibility to political instability and climate-induced shocks. The Horn of Africa region has also experienced swarms of locusts over the past year that have increased food insecurity.

Under a worst-case scenario, Somalia's real GDP is forecast to contract by 5.4% in 2020 and inflation to hit 6.3% as imports decrease.

The Bank's grant funding aligns with Somalia's development objectives and COVID-19 preparedness and response plans. The intervention also aligns with the Bank's Ten-Year Strategy, and its Eastern Africa Regional Integration Strategy and broader efforts to combat fragility and build resilience in Africa.

Contact:

Olufemi Terry | Communication and External Relations Department | African Development Bank | email: o.terry@afdb.org

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