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Somalia debt clearance paves way for IFAD investment amid drought

By Teresa Welsh
Thursday February 16, 2023

Women and children walk past animal carcasses in Sagalo village, Somali region. Five consecutive failed rainy seasons have brought severe drought to the region. Photo by: Mulugeta Ayene / UNICEF Ethiopia / CC BY-NC-ND

After three decades of suspension for outstanding debt, Somalia can now receive funding from the International Fund for Agricultural Development as it struggles with record drought and millions of its people teeter on the brink of famine.

Germany, Sweden, Belgium, and Italy paid off Somalia's debt to the United Nations international financial institution — debt that had prevented IFAD from making investments in the country’s agricultural and pastoral systems.

In a press conference at this week’s IFAD Governing Council meeting, Somali President Hassan Sheikh Mohamud said the debt clearance represented a “new dawn” for Somalia as it attempts to move from humanitarian to development financing.

“The reengagement of IFAD is the beginning of that transition. That helps a lot,” Mohamud told reporters in Rome. “It’s opening a door that the other partners, the other international organizations will follow suit.”

Somalia has a lot of “challenges” and needs support from the international community, particularly when it comes to food security, Mohamud said. As many as 8.3 million Somalis could suffer from high levels of food insecurity between April and June, while an estimated 214,000 people are already in catastrophic food insecurity.

IFAD President Alvaro Lario said $11.6 million will be made immediately available, while another $50 million will go toward a new agricultural development project providing key inputs such as seeds, irrigation technology, and climate-smart practices. There will also be additional funding through microfinance loans.

“Clearly we have to provide humanitarian assistance to save lives now, but it is also equally important that we lay the foundation today for a brighter future,” Lario said. “Solutions exist for people to adapt. A drought, even a long one, should not mean hunger and death. And it is inhumane to keep people living in cycles of crises.”

IFAD also announced Ukraine had become its 178th member as the country’s heavily agricultural economy has suffered deeply following last year’s invasion by Russia. A top producer of key exports such as wheat, corn, and sunflower oil, Ukraine’s agricultural sector has sustained an estimated $2.2 billion in damages.

According to IFAD, 4 million small-scale growers produce 80% of fruits, vegetables, and dairy in Ukraine even as most exports come from large-scale farms.

The Governing Council meeting also marked the launch of IFAD’s 13th replenishment, which will begin with the 2025 funding cycle. It invests in almost 100 countries in projects which benefit over 90 million people.

According to the institution, only $0.04 of every $1 in official development assistance currently goes to agriculture. But every $1 spent saves $10 in future emergency assistance, and IFAD reports more than doubling every dollar it receives into additional financing.

The organization wants to increase funding from its donors even as many countries have reduced resources amid an economic downturn and lingering effects of the COVID-19 pandemic.

Ukraine won’t be integrated into IFAD’s funding cycle until IFAD13 begins in 2025, but in the meantime the financial institution will “explore ways to mobilize funds to support Ukraine’s rural development priorities, including the rehabilitation of rural infrastructure, activities that help increase agricultural productivity, improve competitiveness and generate employment.”


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