Team LeaderPatrick Thaddayos Balla, Paul Baringanire
Approval Date(as of board presentation) July 6, 2020
Total Project CostUS$ 1.45 million
Commitment AmountUS$ 0.00 million
Project Information Document-Integrated Safeguards Data Sheet - Somali Electricity Access Project Additional Financing - P173637
A. Basic #Project Data Country Project ID Project Name Parent Project ID (if any) Somalia P173637 Somali Electricity Access Project Additional #Financing P165497 Parent Project Name #Region Estimated Appraisal Date Estimated Board Date Somali Electricity Access Project AFRICA 18-Jun-2020 25-Jun-2020 Practice Area (Lead) Financing Instrument Borrower(s) Implementing #Agency #Energy & Extractives Investment Project Financing #Ministry of Finance, Federal #Republic of Somalia Ministry of Finance, Somaliland, Ministry of Energy and #Water Resources, FGS, Ministry of Energy and Minerals, Somaliland
Country Context Somalia has a population of about 14 million, of which roughly 60 percent are nomadic and seminomadic pastoralists, and 60 percent live in rural areas. Most Somalis today live in poverty and vulnerability: 2.3 million live on the margins of food insecurity and 1.1 million are internally displaced. Close to three fourths of the Somali population live in poverty, about 43 percent in extreme poverty, and Gross #Domestic Product (#GDP) per capita was estimated to be only US$446 in 2017, having grown at only 2 percent per year over the last four years. Humanitarian support is a life-saving reality for many in areas that are accessible to Non-Governmental Organizations (NGOs). However, humanitarian action alone cannot develop the sustainable livelihoods necessary for poverty reduction – Somalia needs #infrastructure investments to enable basic service delivery to its citizens. Income per capita is 20 to 40 percent higher than GDP per capita due to remittances. Remittances alone in 2016 were estimated at US$1.2–2 billion, equivalent to 23 to 38 percent of GDP. Remittances augment household income and create a buffer against shocks, however, remittances are vulnerable not only to changing habits of diaspora as a new generation comes of age but also to de-risking in the #international financial #system. 2. For over two decades, Somalia has experienced protracted conflict and fragility, the collapse of rule of law, institutions, basic public services and the social contract, resulting in the impoverishment of millions. The 2012 Provisional #Constitution established a federal political structure, including a parliament, the Federal Government of Somalia (#FGS) and the #Federal Member States (FMS). The sustained political, economic and institutional reforms undertaken since 2016 have succeeded in rebuilding core state capabilities. Somaliland on the other hand has already experienced two decades of major changes in the security sector, political system, economy, regional environment and technology. In the process, #Somaliland and its people have demonstrated impressive resilience and adaptability. Despite the years of destruction brought on by the civil war, Somaliland has been the site of impressive levels of #economic recovery.
Public finances have improved in recent years, based on increasing formalization of customs arrangements and security. The Federal #Government demonstrated stronger fiscal discipline in 2017, avoiding the accrual of new budgetary arrears, and generating domestic revenues of US$143 million, beyond the target set in the International Monetary Fund (#IMF) Staff Monitored Program (#SMP). Over 70 percent of revenue collected is from customs duties, although the Government has recently taken steps to implement sales tax collection at the port of Mogadishu and is looking to broaden the tax base in 2018. Despite increasing revenues, the Federal Government remains dependent on #development partners to finance capital expenditures (CAPEX). Compensation of employees and spending on goods and services accounted for more than 80 percent of expenditure. Fifty-three percent of the budget was used to compensate employees in 2017 while 34 percent was used to buy goods and services, mainly rations for the security sector.
The World Bank and IMF recently approved Somalia’s accession to the Heavily Indebted Poor Countries (HIPC) debt relief and associated arrears clearance. Somalia was in debt distress with significant arrears to International Financial Institution (IFI) including the World Bank, IMF, and African Development Bank (AfDB) that made it ineligible for financing from International Development Association (IDA) and many other concessional financing sources. This step will open up #opportunities for Somalia to access concessional financing from the World Bank’s International #Development #Association (#IDA) and to work closely with all arms of the World Bank Group to attract investment that will support the country’s stability and development. The decision to reengage is based on the government’s strong record of fiscal, political, social and economic reforms in recent years. Somalia’s fiscal management agenda now covers revenue mobilization, budgeting, procurement, auditing, and cash management, as well as accountability over Public Financial Management. The country has also focused strong attention to building core monetary and financial sector governance institutions, establishing the basic legal foundations for a market economy, and introducing reforms in strategic sectors including telecommunications, banking, and energy. Economic policy reforms, such as the recently enacted Public Financial Management Law and the Company Law, have improved public financial management and revenue generation.
The #Somalia #energy #sector is one of the most underdeveloped in the region. Low electrification rates especially in rural areas, high cost of power, high technical and commercial losses, dependency on imported petroleum products for electricity generation, and reliance on biomass resources for cooking mean that only a very small fraction of the Somali population has access to affordable, safe, #reliable, and predictable energy services. Both public and private sector energy actors are highly #capacity constrained; and weak legal and regulatory frameworks, limited financing and investment, and lack of data for effective decision making continue to hold back sector development. Urban access is estimated at 33 percent, and rural access at 4 percent. With an average household size of 5.9, this translates to approximately 1.8 million un-electrified households nationwide. Private sector players supply more than 90 percent of power in urban and peri-urban areas using local private mini-grids, having invested in diesel-based systems of between 500 kilovolt ampere (kVA) to 5000 kVA installed capacity per mini-grid. Somalia’s price of #electricity can reach a maximum of US$1/kilowatt hour (kWh) - one of the costliest places in the #world to buy power.