Building Financial Resilience in Fragile Contexts: The Journey of Somalia’s Disaster Risk Financing Strategy

When we first began working with Somalia on its Disaster Risk Financing (DRF) agenda, we knew we were stepping into one of the world’s most complex environments. Somalia is not only fragile and conflict-affected, but also highly disaster-prone. Droughts, floods, and cyclones are regular occurrences, and each event brings devastating consequences for people’s lives and livelihoods.

All these shocks exert fiscal pressure on the government is immense—immediate disaster response costs alone are estimated at $129 million annually, which is a staggering 12% of the 2024 budget. For extreme events, costs could increase fivefold.

From the outset, we were struck by the government’s appetite to adopt and decentralize DRF. The Government was  clear that preplanning and setting aside funding for disaster response need not be at odds with financing urgent development priorities, instead DRF enables resilient development. Considering the nascent federalism dynamic, the Federal Government of Somalia (FGS) is keen to take the DRF strategy beyond the national level. There was a clear recognition that decentralizing the strategy could empower federal member states to develop their own tailored approaches. This was a lesson for me: in fragile contexts, solutions must be flexible and inclusive, reflecting both top-down and bottom-up perspectives.

Why DRF Matters

Somalia’s disaster response has long depended on ad hoc humanitarian funding. While this has saved lives, it’s unpredictable and often misaligned with national priorities. Through our work, we have seen firsthand how a government-led DRF Strategy can change this dynamic. By introducing pre-planned, risk-layered financing instruments—like disaster reserve funds, contingent credit, and insurance—Somalia can ensure timely and predictable resources when disasters strike. This isn’t just a technical shift; it’s foundational for state-building.

The three key takeaways have been the cost efficiency of risk layering, the importance of integrating risk financing principles into project funding and the need to leverage existing delivery mechanisms, such as shock-responsive social protection programs. It’s not enough to have the right instruments; they must be woven into the fabric of government systems.

Our analysis shows that risk-layering would be more cost-efficient than Somalia’s current approach for both moderate and more extreme events. It could save $24 million annually and ensure timely response.

A Collaborative Approach

Over the past two years, we’ve had the privilege of supporting the FGS as they moved from reactive crisis management to proactive financial planning. In our latest engagement, we organized and lead a DRF Strategy drafting and training workshop in October, bringing together 30 stakeholders from across government, civil society, and development partners. The energy in the room was palpable. Somalia officials spoke passionately about the urgency and transformative potential of the DRF Strategy.

One of the highlights was the Director General (DG) of the Ministry of Finance who noted that Somalia’s fiscal space is extremely limited, yet the cost of disasters is growing. A DRF Strategy will gives Somalia a plan to manage these shocks without derailing development. That moment reinforced how critical it is to align disaster financing with broader development goals.

Early Impact and Growing Momentum

One of the most rewarding aspects of this journey has been witnessing tangible progress. Informed by a joint World Bank–FGS DRF diagnostic (available here) and enabled by post-HIPC completion, Somalia secured its first Catastrophe Deferred Drawdown Option (Cat DDO) in May 2025. This contingent line of credit provides immediate liquidity following disasters or public health emergencies. It’s complemented by a Contingent Emergency Response Project (CERP), which enables swift disbursement of funds for emergency needs.

These instruments have dramatically increased the amount of prearranged funding available to the government. Previously, only about $44 million was available over four years; now, Somalia has access to hundreds of millions in rapid-response financing. The strategy will further expand access to tools like the IMF Rapid Credit Facility and the Catastrophe Containment and Relief Trust.

Opportunities Beyond Financing

What excites us the most is that the DRF Strategy is about more than just money. It’s strengthening government systems by embedding risk-informed decision making into public financial management and investment planning. It’s supporting holistic disaster risk management by complementing the development of Climate Risk Early Warning Systems (CREWS), which will provide timely forecasts and triggers for DRF funding. Early action means fewer losses and lower response costs.

We’ve also seen how the strategy fosters coordination across ministries, reduces fragmentation, and aligns disaster financing with climate adaptation and development strategies. Critically, it enhances state legitimacy—when citizens see their government delivering rapid, targeted support during crises, trust grows. This is essential for Somalia’s transition out of fragility.

Somalia’s nascent takaful market is another bright spot. The sector is well positioned to grow and help close the disaster protection gap, though more work is needed to build technical and operational capacity.

Looking Ahead—Lessons and Hope

Somalia’s DRF Strategy isn’t a silver bullet, but it’s a cornerstone for resilience. By reducing reliance on humanitarian aid and embedding disaster risk financing into national systems, Somalia is better positioned to protect its people, foster resilient economic growth, and strengthen its social contract.

This journey has reinforced the power of collaboration, the importance of flexibility, and the value of proactive planning. We’re optimistic about Somalia’s future. With continued commitment and innovation, we believe crises will no longer derail development—they’ll be managed through government-led, resilient solutions.

Acknowledgments: WB technical assistance on the Somalia DRF diagnostic and Strategy is supported by the Global Facility for Disaster Reduction and Recovery and the Somalia Multi Partnership Fund.