Highlights:

• Drought dampened economic activity in 2022, wiping out the agricultural sector and intensifying a humanitarian crisis. Relentless drought and high food prices weakened household livelihoods and purchasing power. The drought was the longest - it started in late 2020 and  continued up to early 2023—and has been the most severe in recent history. Indeed, it surpassed the 2010/2011 and 2016/2017 droughts in both duration and severity. The debilitating drought left Somalia on the verge of a humanitarian catastrophe, destroying crops and livestock, and forcing huge numbers of people to leave their homes in search of food and water. Drought also decimated the performance of the agricultural sector as one-third of all livestock in the worst-affected areas had died since mid-2021. In addition, crop production remained extremely poor. This intensified a humanitarian crisis, with nearly half of the population being food insecure, and 1.3 million people being displaced.
• Inflationary pressures intensified in 2022. Consumer prices accelerated in the first half of 2022 due to both domestic and external factors. Commodity prices, which started to rise in mid- 2021, were driven by challenges in global supply chains and continued to increase due to the severe drought conditions. Drought reduced the capacity of Somalis to grow and buy their own food, thereby increasing food insecurity. At the same time, Russia’s invasion of Ukraine disrupted the global food markets and energy prices. Overall food inflation remained significantly high and stickier as compared to previous periods. Indeed, overall inflation peaked in July 2022, and started declining in the second half of the year as international energy prices started to ease. However, food price inflation remained above 10 percent in some regions especially Somaliland, reflecting supply disruptions caused by the drought.
• The increased frequency and magnitude of shocks in Somalia directly affects the poor and contributes to displacement, food insecurity and conflict. Somalia’s waters are a vital ingredient to building resilience, improving prosperity, and developing the economy. It is well understood that water—including its variability and scarcity—are closely linked to economic output, international trade, human capital formation, poverty, and economic shocks. Balancing the demands for food and the supply of water are also central to Somalia’s growth agenda. Without major changes in society, policy and politics, the current downward trend in food availability is likely to continue, thereby dampening economic growth and worsening levels of poverty. Without these major changes, recurrent food insecurity, and extremely difficult conditions will be the norm for many in the coming decades.
• For Somalia to continue to transition from fragility and to improve household resilience to shocks, access to water is important. Water is the central enabler of human development, urban development, job creation, and a driver of long- term economic growth. Underpinning resilience and prosperity, Somalia needs an integrated economic policy that places water at its center encompassing recommendations that relate to five opportunities for change and innovation, including:
  • Ensure coordination and deliver a whole-of- society water dialogue.
  • Optimize the use of both blue and green water to grow the national economy.
  • Boost export revenues, and convert Somalia’s livestock sector into a world-class, high-quality animal and meat export market.
  • Enter a circular economy and ecology that builds on resilience, innovation, and integrated systems.
  • Establish robust, inclusive, and transparent governance systems for water management.