The European Commission will provide €100m to the Somali budget over the next two and a half years to support reforms in the country and strengthen government institutions.
The support will help the Somali government build a “unified, federal state”, which will help build resilience to future shocks and improve service delivery.
EU commissioner for International Cooperation and Development Neven Mimica said: “[The budget support] gives the government resources to implement reforms and build a stronger state able to deliver basic services to its people.”
The civil war that broke out in 2009 in the east African country and is ongoing, despite the efforts of the government, which came to power in 2012, to stabilise the country.
The European bloc said that the country was “on a positive track towards stability and growth” and that the support would help foster long-term recovery.
Up to €92m of the funding will go to the federal government through budget support, with the remaining €8m to help improve skills across the government and strengthen oversight institutions.
According to the World Bank, the Somalian economy’s growth weakened in 2017 due to severe drought. It declined to 1.8% from 2.4% in 2016.
The bank approved $80m in loans to Somalia in September, to help with public finance reforms, including support to improve services like education and healthcare.
More than half of the population lives in poverty and the agricultural sector almost collapsed with crop failures, a shortage of water and increased livestock mortality during the drought.
Domestic revenue grew by 26.5% from $112.7m in 2016 to $142.6m in 2016, driven by trade taxes, the bank said. It added that donor grants almost doubled to $103.6m in 2017.
But the Washington-based lender added that the country’s government is still struggling with basic challenges in its public financial management operations.
Current spending priorities focus on the security and administrative services, which account for almost 90% of total spending, leaving little for social services.