PORTFOLIO OVERVIEW

Updated December 2015

The initial MPF pipeline focuses on core state functions and socio-economic recovery in Somalia, in line with the Somali Compact Peacebuilding and Statebuilding Goals for for Economic Foundations (PSG IV) and Revenue and Services (PSG V). By adopting a phased approach to pipeline development and scale-up, the fund can adapt to the dynamic operating context as well as respond to new opportunities as they emerge.

Highlights from Year One:

Under PSG V, the MPF has made progress in engaging key government institutions to enhance their role in revenue collection and service delivery. The ‘Troika’ projects of the MPF focusing on core government functions are supporting the Somali authorities to come together to deliver services and support stability and growth in the country. These include the Recurrent Cost & Reform Financing (RCRF) Program, the Public Financial Management (PFM) Reform Project and the Public Sector Capacity Injection Project (CIP).

Over the first year of MPF implementation important steps have been taken in the areas of payroll reform, strengthening of the Somalia Financial Management Information System (SFMIS) as well as efforts to strengthen budget preparation and payment systems. In parallel to process and systems reform, the MPF is engaging with the government to support the development of a professional, high quality and sustainable civil service. These reforms are being rolled out at the level of the Federal Government and in select sub-national governments in partnership with other stakeholders, notably the Somalia Stability Fund (SSF), to ensure national coverage. Federal and regional government counterparts have begun an important dialogue on intergovernmental fiscal relations, reflecting the emergence of increasingly constructive relations between the federal and regional authorities.

These positive developments, reflecting a new maturity in the national dialogue, helped enable he basis for the first Article IV Consultation by the International Monetary Fund (IMF) in two decades in July 2015 and the initiation of discussions on a potential Staff Monitored Program at the Annual Meetings in Lima in October. Supporting dialogue

The MPF has started to support the development of a dialogue between the government and the private sector. Recognizing that the Somali economy has reached the limits of growth in an unregulated context, MPF projects under PSG IV are helping to define the role of the government in the development of a sustainable private sector-led economy. The dialogues facilitated through projects in Oil and Gas, Energy and Information and Communication Technologies (ICT) sectors are building an understanding of the benefits to the consumer and to the private sector of improving the regulatory environment as well as of the role of the federal government in supporting regional economic growth. These include Petroleum Sector Inclusive Development, ICT Sector Support (Phase II), and Somalia Power Sector Development Support. In parallel, projects on private and financial sector development as well as remittances are helping to build systems for improving access to finance: a key constraint to growth. The Somali Core Economic Institutions and Opportunities Program (SCORE) is a long term investment designed to improve the enabling environment for private and financial sector development and catalyze private investment and job creation. In complement, the Project to Support Remittance Flows to Somalia (SRFS) works alongside the Central Bank of Somalia (CBS) to implement a number of activities aimed at tackling key deficiencies affecting the remittance market in Somalia until a sounder financial system is in place.

The MPF pipeline has also served as a platform for defining engagement by the International Finance Corporation in Somalia, which can leverage private capital for further reforms. Supporting the evidence base In a context defined by the absence of credible data and information, the MPF portfolio is helping to fill information gaps for evidence-based decision making in targeted sectors. This includes, for example, mapping wind patterns to inform wind power investments, benchmarking regional salary scales for civil servants and advisers and analyzing the use of the telecommunications spectrum to inform a more optimal allocation of frequencies. There is also on ongoing knowledge work initiated by the World Bank before the establishment of the MPF that focuses on poverty data, using High-Frequency Survey methodologies tailored for Somalia and also the “Somalia Economic Update.”

Moving forward, analytical work and data collection will be enhanced under the MPF to provide better information for decision making processes within the government and amongst development partners, including the development of the National Development Plan. Adapting to the dynamics of the operating environment

The initial MPF portfolio is designed to react flexibly to changes in the operating context. It consists of a diverse set of interventions, which include projects that are quick to mobilize in parallel with projects that take more time to develop and implement. It is also designed to be able to provide support to new opportunities and scale back or change course for specific initiatives, when necessary.

Several of the MPF projects build on foundations established through pilot initiatives funded by the World Bank’s State and Peacebuilding Fund (SPF) as well as the Special Financing Facility established by Norway. This has allowed the MPF to roll out certain projects more quickly (e.g. ICT, PFM, SCORE, RCRF), initiate dialogue with key stakeholders and demonstrate tangible results in the first year of the fund’s operation. Projects such as the Somali Urban Investment Planning Project (SUIPP) – which is the pilot for a larger-scale investment – have taken longer to mobilize, reflecting the additional complexities of the operating environment and the need for careful consideration of safeguards and security.

The 2015 RCRF Annual Review highlighted the important role the MPF is beginning to play in facilitating fiscal dialogue between the federal and regional governments. As the number of states eligible for RCRF financing increases, the MPF has the potential to further strengthen this dialogue through the allocation of resources based on performance. Both the Public Financial Management (PFM) Reform project (initially financed under the SPF) and the Public Sector Capacity Injection Project (CIP) are also experiencing increased demand, including from new regions. Ensuring the MPF can respond to positive progress – including through partnership with other agencies such as has already begun with the SSF - will be an important feature of the discussions with MPF donor and government counterparts as the fund moves into its second year of implementation.