## 2. Boosting Economic Recovery after Conflict: Patterns and Policies

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### Introduction
- Recovery from conflict requires restoring macroeconomic stability, rebuilding institutions, and securing resources for reconstruction.
- Analysis uses novel statistical analyses and selected case studies, focusing on economies in the Middle East and North Africa, Afghanistan, and Pakistan (MENAP) and Caucasus and Central Asia (CCA).
- Main policy areas examined: macroeconomic stabilization, financing including international support and debt relief, and institutional quality improvements.
- Main data source: Uppsala Conflict Data Program’s Georeferenced Events Database (covering 1989–2024).
- Conflict definition: conflict intensity greater than 25 deaths per million population in a given year.
- Post-conflict episode definition: conflict intensity falls below 25 deaths per million population for at least two consecutive years.

### Assessing the Duration and Resilience of Post-Conflict Recoveries
- Sample and regional coverage:
  - 121 post-conflict episodes identified over the past 30 years.
  - 20 episodes in the MENAP region.
  - 8 episodes in the CCA region.
  - 93 episodes in the rest of the world.
- Peace duration and fragility:
  - Post-conflict (“peace”) episodes in the MENAP region tend to be shorter than elsewhere.
  - The probability of sustaining peace in MENAP falls below 50 percent after 10 years (Kaplan-Meier estimates).
- Conflict intensity and growth performance:
  - MENAP conflicts are more intense on average than those in the CCA region and the rest of the world (average annual per-capita conflict-related deaths per million population).
  - Average five-year post-conflict GDP per capita growth:
    - MENAP: less than 1 percent
    - CCA: 4.8 percent
    - Rest of the world: 2.2 percent
- Recovery classification and stylized facts:
  - Recovery is "successful" if: (1) GDP per capita returns to its pre-conflict projected path within five years, and (2) peace is sustained over these five years.
  - Only about one-third of the episodes in the MENAP and CCA regions and the rest of the world are categorized as successful.
  - During conflict (five years before the end of conflict), output tends to lag pre-conflict growth trend for all economies, with MENAP and CCA lagging more than elsewhere.
  - Post-conflict outcomes:
    - Successful recoveries: output exceeded pre-conflict projected trends by about 12 percent on average for all economies excluding MENAP and CCA, but only about half a percent on average in the MENAP and CCA regions.
    - Failed recoveries: output in the MENAP and CCA regions fell 17 percent below trend, compared to just 3 percent elsewhere.
  - Investment and consumption dynamics in MENAP and CCA:
    - Successful recoveries: real gross capital formation up by nearly 75 percent on average within five years of a conflict ending; real consumption rebound of 25 percent.
    - Failed recoveries: investment growth typically does not turn positive until the fourth year and consumption lags significantly.
    - Rest of the world: successful recoveries see real gross capital formation and real consumption rise by 50 and 20 percent respectively five years after conflict.
  - Other recovery correlates:
    - Successful recoveries tend to show greater increases in gross remittances, net exports, and official development assistance in the form of grants within the first five years after conflict.

### Why Some Recoveries Succeed While Others Stall
- Episode- and conflict-characteristic correlates of success:
  - Recoveries more likely when prior conflict is shorter, less intense, and not a civil war.
  - Greater government allocation of fiscal resources to restoring public order and safety after conflict is associated with higher success probability.
  - Higher levels of grant-based official development assistance and stronger governance after the end of conflict are associated with better outcomes.
  - Differences between successful and failed recoveries in MENAP and CCA tend to be larger on average than in the rest of the world.
- Security and political economy:
  - Fragile peace or persistent security threats increase reconstruction costs and discourage investment (illustrated by Afghanistan case study).

### Conditions and Policies Supporting Post-Conflict Recovery — Multivariate Findings
- Empirical approach:
  - Logistic regressions relate a binary success/failure outcome to explanatory variables capturing macroeconomic stabilization, financing and international support, and structural policies and institutions.
  - Prior conflict characteristics (duration and intensity) are included as controls.
  - Results are associational and suggestive rather than causal.
- Macroeconomic stabilization:
  - Early stabilization lowers uncertainty and builds confidence, aiding rebound of investment and consumption.
  - Macroeconomic volatility measure: first principal component of volatilities in real output growth and inflation in the first five years of peace.
  - Empirical relationship:
    - Higher macroeconomic volatility in the first five years of peace reduces likelihood of successful recovery.
    - An increase equivalent to a jump from the 25th to the 75th percentile of macroeconomic volatility across post-conflict cases is associated with a more than 25 percent drop in the odds ratio of success.
  - Volatility measures:
    - Output growth volatility: average squared deviation of real per-capita GDP growth relative to its mean in the first five years of peace.
    - Inflation volatility: average squared deviation of CPI inflation relative to a 5 percent benchmark in the first five years of peace.
- Financing, international support, and institutions:
  - Greater grant-based official development assistance in the first five years after conflict is associated with higher probability of successful recovery.
  - Stronger governance indicators after conflict are associated with better outcomes.
  - Allocation of fiscal resources to public safety and order in the aftermath correlates with higher success likelihood.
  - The prior conflict’s duration and intensity remain important controls influencing initial conditions and recovery dynamics.

### Macroeconomic Stabilization — Specific Findings
- Financial openness:
  - A shift toward greater financial openness over the first five years of peace (measured by the Chinn-Ito index) is significantly associated with a higher likelihood of success.
  - Improvements include lowering restrictions on capital and current account transactions, unifying multiple exchange rates, and reducing surrender requirements for export proceeds.
- Social and public spending:
  - Public spending on social services supports macroeconomic stabilization by maintaining social cohesion and promoting inclusion.
  - On average, each additional 1 percent of GDP spent during the first five years of peace is associated with:
    - 15 percent higher odds ratio of a successful recovery for social protection,
    - 42 percent higher odds ratio of a successful recovery for health,
    - 119 percent higher odds ratio of a successful recovery for housing.
- Case evidence:
  - Afghanistan: currency reform and reining in monetary financing to curb inflation.
  - Rwanda: unifying parallel exchange markets.

### Financing and International Support — Specific Findings
- Debt and fiscal constraints:
  - Conflict-affected states often face severe debt vulnerabilities and damaged productive capacity that limit resource mobilization.
- Role of external support:
  - External financial support—debt relief, grants, concessional financing—can expand fiscal space and boost recovery.
  - Debt restructuring (during conflict or within five years after the onset of peace) is associated with an over 50 percent higher estimated probability of a successful recovery compared with cases without restructuring.
- Capacity development:
  - Weak absorptive capacity makes sequencing of structural reforms important; IMF capacity development and institution-building support have been extensive.
  - Average of about 56 capacity development missions over five years in both successful and failed post-conflict recovery cases.
  - Largest shares of assistance were in fiscal and financial sector issues, followed by legal frameworks and data systems.
- Case examples:
  - Afghanistan: debt relief freed up resources to rebuild state capacity; IMF technical assistance helped rebuild fiscal and monetary institutions.
  - Rwanda: fiscal space from debt relief and external aid used to safeguard productive investments.

### Institutions and Structural Reforms — Specific Findings
- Institutional quality:
  - Stronger institutions and better governance at the onset of a post-conflict episode (measured by the average value of the Worldwide Governance Indicators) are associated with higher likelihood of successful recovery.
  - Continued improvements in governance after conflict increase likelihood of success:
    - A 1 standard-deviation improvement in overall institutional quality during the first five years of peace—comparable to moving from the 10th to the 75th percentile—is associated with roughly double the odds ratio of a successful recovery.
  - Most impactful governance gains: government effectiveness, voice and accountability, political stability, and to a certain extent control of corruption.
- Case examples:
  - Afghanistan: strengthening fiscal and monetary institutions.
  - Rwanda: reforms to improve governance, including privatization of state-owned entities.

### Quantifying the Importance of Conditions and Policies
- The three policy-related categories—macroeconomic stabilization, financing and international support, and institutions and structural reforms—together explain the policy-related variation in the odds of successful post-conflict recovery across MENAP, the CCA, and the rest of the world.
- Variation in macroeconomic stabilization efforts and financing support (captured by macroeconomic volatility, social spending, and debt restructuring episodes) account for the bulk of the policy-related variation in the odds of success; institutions and structural reforms (captured by initial institutional quality) account for the rest.
- No major differences in the relative contribution of these factors across MENAP, the CCA, and the rest of the world, suggesting lessons from successful recoveries elsewhere are relevant for MENAP and CCA economies.

### Lessons from Case Studies
- Cases examined: Afghanistan (1989–2022), Iraq (2003–18), Rwanda (1990–98), Somalia (1989–ongoing).
- Four key lessons:
  - Well-coordinated donor assistance—especially when mobilized within the economy’s fiscal frameworks—can enhance the impact of external support (Afghanistan); a formal operational donor coordination mechanism may increase effectiveness (Somalia).
  - Economic stabilization must be accompanied by structural reforms aimed at improving governance and economic liberalization (for example, privatization in Rwanda).
  - Maintaining political stability is essential to sustain reform momentum (Rwanda) and to avoid relapsing into conflict (Afghanistan).
  - International institutions play a role beyond financing through coordination and technical assistance (Iraq); IMF technical assistance was instrumental in Afghanistan for rebuilding fiscal and monetary institutions.
- Caveats:
  - Success is not guaranteed when overlapping adverse shocks materialize (Iraq) or when persistent security challenges exist (Afghanistan, Iraq, Somalia).
  - Continued engagement and technical assistance supported long-term reconstruction and institutional development in Rwanda.

### Selected Case Highlights
- Iraq:
  - IMF-supported programs coordinated international support and helped establish reform commitment, paving way for substantial debt relief.
  - Stock of debt held by Paris Club creditors was reduced by 80 percent in three phases, contingent on IMF programs.
  - External shocks (notably oil price fluctuations) and prolonged security challenges constrained recovery.
- Rwanda (1990–98):
  - Prioritized fiscal consolidation and institution building before broader market liberalization.
  - Implemented 27 key reforms between 1997 and 2004.
  - Reached the Heavily Indebted Poor Countries decision point in 2000 and qualified for the Multilateral Debt Relief Initiative in 2006, resulting in external debt reduction exceeding $1 billion.
- Somalia (1989–Ongoing):
  - 2008 Djibouti Agreement and the 2012 Provisional Constitution enabled renewed external support and state-building.
  - Since 2016, more than 100 structural measures implemented under IMF-supported programs.
  - 2023 milestone: $4.5 billion in debt relief under the Heavily Indebted Poor Countries Initiative.
  - Donor contributions to the Somalia Country Fund have been instrumental in ensuring sustained IMF capacity development support.
  - Tangible outcomes: improved revenue mobilization, modernized public financial management, strengthened central bank capacity, and greater transparency and accountability.
- Afghanistan:
  - Currency reform and reining in monetary financing to curb inflation; debt relief and IMF technical assistance aided rebuilding fiscal and monetary institutions.

### Conclusions and Policy Priorities
- Three core priorities emerge:
  - Macroeconomic stabilization,
  - Securing external financing—including international support and debt relief,
  - Strengthening institutions.
- Practical takeaways:
  - Well-coordinated donor assistance can enhance external support impact.
  - Sequencing matters: macroeconomic stabilization is the immediate priority, while institutional and structural reforms proceed in parallel but typically take longer to manifest.
  - Political stability is essential to maintain reform momentum.
  - International institutions play an important role beyond financing, through support for institution building and technical assistance.
- Research avenues:
  - Political economy, detailed policy design, and external shocks (global demand, trade policies, financing conditions) can influence recovery outcomes and warrant further research.

*Prepared by IMF staff (Regional Economic Outlook—Middle East and Central Asia, October 2025).*

### 2. Boosting Economic Recovery after

### 2. Boosting Economic Recovery after Conflict: Patterns and Policies

### Introduction
- Economic recovery from conflict requires restoring macroeconomic stability, rebuilding institutions, and securing resources for reconstruction.
- The chapter analyzes post-conflict recovery experiences using novel statistical analyses and selected case studies, focusing on economies in the Middle East and North Africa, Afghanistan, and Pakistan (MENAP) and Caucasus and Central Asia (CCA).
- Key policy areas examined: macroeconomic stabilization, financing including international support and debt relief, and institutional quality improvements.
- Main data source: Uppsala Conflict Data Program’s Georeferenced Events Database (covering 1989–2024).
- Conflict definition used: conflict intensity greater than 25 deaths per million population in a given year.
- Post-conflict episode definition: conflict intensity falls below 25 deaths per million population for at least two consecutive years.

### Assessing the Duration and Resilience of Post-Conflict Recoveries
- Sample and regional coverage:
  - 121 post-conflict episodes identified over the past 30 years.
  - 20 episodes in the MENAP region.
  - 8 episodes in the CCA region.
  - 93 episodes in the rest of the world.
- Peace duration and fragility:
  - Post-conflict (“peace”) episodes in the MENAP region tend to be shorter than elsewhere.
  - The probability of sustaining peace in MENAP falls below 50 percent after 10 years (Kaplan-Meier estimates).
- Conflict intensity and growth performance:
  - MENAP conflicts are more intense on average than those in the CCA region and the rest of the world (average annual per-capita conflict-related deaths per million population).
  - Average five-year post-conflict GDP per capita growth:
    - MENAP: less than 1 percent
    - CCA: 4.8 percent
    - Rest of the world: 2.2 percent
- Recovery classification and stylized facts:
  - A recovery is classified as successful if: (1) GDP per capita returns to its pre-conflict projected path within five years, and (2) peace is sustained over these five years.
  - Only about one-third of the episodes in the MENAP and CCA regions and the rest of the world can be categorized as successful.
  - During conflict (five years before the end of conflict), output tends to lag pre-conflict growth trend for all economies, with MENAP and CCA lagging more than elsewhere.
  - Post-conflict outcomes:
    - In successful recoveries, output exceeded pre-conflict projected trends by about 12 percent on average for all economies excluding MENAP and CCA, but only about half a percent on average in the MENAP and CCA regions.
    - In failed recoveries, output in the MENAP and CCA regions fell 17 percent below trend, compared to just 3 percent elsewhere.
  - Investment and consumption dynamics in MENAP and CCA:
    - Successful recoveries: real gross capital formation up by nearly 75 percent on average within five years of a conflict ending; real consumption rebound of 25 percent.
    - Failed recoveries: investment growth typically does not turn positive until the fourth year and consumption lags significantly.
    - For the rest of the world, successful recoveries see real gross capital formation and real consumption rise by 50 and 20 percent respectively five years after conflict, with smaller differences between successful and failed cases.
  - Other recovery correlates:
    - Successful recoveries tend to show greater increases in gross remittances, net exports, and official development assistance in the form of grants within the first five years after conflict.

### Why Some Recoveries Succeed While Others Stall
- Episode- and conflict-characteristic correlates of success:
  - Recoveries are more likely to be successful when the prior conflict is shorter, less intense, and not a civil war.
  - Success is more common when governments allocate greater fiscal resources to restoring public order and safety after conflict.
  - Higher levels of grant-based official development assistance and stronger governance after the end of conflict are associated with better outcomes.
  - Differences between successful and failed recoveries in MENAP and CCA tend to be larger on average than in the rest of the world.
- Security and political economy:
  - Fragile peace or persistent security threats increase reconstruction costs and discourage investment (illustrated by the Afghanistan case study referenced).

### Conditions and Policies Supporting Post-Conflict Recovery — Multivariate Findings
- Empirical approach:
  - Logistic regressions are used to relate a binary success/failure outcome to explanatory variables capturing: (1) macroeconomic stabilization, (2) financing and international support, and (3) structural policies and institutions.
  - Prior conflict characteristics (duration and intensity) are included as controls.
  - Results are associational and suggestive rather than causal.
- Macroeconomic stabilization:
  - Stabilizing the economy in the early stages after conflict supports recovery by lowering uncertainty and building confidence, which helps rebound investment and consumption.
  - Measure of macroeconomic volatility: first principal component of volatilities in real output growth and inflation in the first five years of peace.
  - Empirical relationship:
    - Economies experiencing higher macroeconomic volatility in the first five years of peace are less likely to achieve a successful recovery.
    - An increase equivalent to a jump from the 25th to the 75th percentile of macroeconomic volatility across post-conflict cases is associated with a more than 25 percent drop in the odds ratio of success.
  - Volatility measures used:
    - Output growth volatility: average squared deviation of real per-capita GDP growth relative to its mean in the first five years of peace.
    - Inflation volatility: average squared deviation of CPI inflation relative to a 5 percent benchmark in the first five years of peace.
- Financing, international support, and institutions (summary of associated factors from bivariate and multivariate analysis):
  - Greater grant-based official development assistance in the first five years after conflict is associated with higher probability of successful recovery.
  - Stronger governance indicators after conflict are associated with better outcomes.
  - Allocation of fiscal resources to public safety and order in the aftermath correlates with higher success likelihood.
  - The prior conflict’s duration and intensity remain important controls influencing initial conditions and recovery dynamics.

*Prepared by IMF staff (Regional Economic Outlook—Middle East and Central Asia, October 2025).*

### 2. Boosting Economic Recovery after Conflict: Patterns and Policies

### 2. Boosting Economic Recovery after Conflict: Patterns and Policies

### Macroeconomic stabilization
- A shift toward greater financial openness over the first five years of peace is significantly associated with a higher likelihood of success, measured by changes in the Chinn-Ito index of capital account openness (Chinn and Ito 2006). Improvements reflect factors such as lowering restrictions on capital and current account transactions, unifying multiple exchange rates, and reducing surrender requirements for export proceeds.
- Public spending on social services supports macroeconomic stabilization through delivery of basic public and social services that help maintain social cohesion, promote inclusion, and support more lasting peace.
- On average, each additional 1 percent of GDP spent during the first five years of peace is associated with:
  - 15 percent higher odds ratio of a successful recovery for social protection,
  - 42 percent higher odds ratio of a successful recovery for health,
  - 119 percent higher odds ratio of a successful recovery for housing (Figure 2.7).
- Case evidence:
  - Afghanistan: currency reform and reining in monetary financing to curb inflation.
  - Rwanda: unifying parallel exchange markets.

### Financing and international support
- Conflict-affected states often face severe debt vulnerabilities and damaged productive capacity that limit mobilization of resources post-conflict.
- External financial support from international donors and creditors—including debt relief, grants, or concessional financing—can expand fiscal space and boost recovery efforts.
- Debt restructuring (during conflict or within five years after the onset of peace) is associated with an over 50 percent higher estimated probability of a successful recovery compared with cases without restructuring (Figure 2.8).
- Grants and other financing have played important roles for Afghanistan, Rwanda, and Somalia.
- Non-financial support matters: weak absorptive capacity in post-conflict economies makes sequencing of structural reforms more important; IMF capacity development and support for institution building have been extensive.
  - Average of about 56 capacity development missions over five years in both successful and failed post-conflict recovery cases.
  - Largest shares of assistance were in fiscal and financial sector issues, followed by legal frameworks and data systems.
- Case examples:
  - Afghanistan: debt relief freed up resources to rebuild state capacity; IMF technical assistance helped rebuild fiscal and monetary institutions.
  - Rwanda: fiscal space from debt relief and external aid used to safeguard productive investments.

### Institutions and structural reforms
- Stronger institutions and better governance support economic development and lasting peace, boosting chances of successful recovery.
- Economies with stronger institutional quality at the onset of a post-conflict episode (measured by the average value of the Worldwide Governance Indicators) are more likely to recover successfully (Figure 2.9, panel 1).
- Continued improvements in governance after conflict also increase likelihood of success:
  - A 1 standard-deviation improvement in overall institutional quality during the first five years of peace—comparable to moving from the 10th to the 75th percentile—is associated with roughly double the odds ratio of a successful recovery.
  - The most impactful gains are in government effectiveness, voice and accountability, political stability, and to a certain extent control of corruption (Figure 2.9, panel 2).
- Case examples:
  - Afghanistan: strengthening fiscal and monetary institutions.
  - Rwanda: reforms to improve governance, including privatization of state-owned entities.

### Quantifying the importance of conditions and policies
- The three policy-related categories considered—macroeconomic stabilization, financing and international support, and institutions and structural reforms—together explain the policy-related variation in the odds of successful post-conflict recovery across MENAP, the CCA, and the rest of the world.
- Variation in macroeconomic stabilization efforts and financing support (captured by macroeconomic volatility, social spending, and debt restructuring episodes) account for the bulk of the policy-related variation in the odds of success; institutions and structural reforms (captured by initial institutional quality) account for the rest.
- There are no major differences in the relative contribution of these factors across MENAP, the CCA, and the rest of the world, suggesting lessons from successful recoveries elsewhere are relevant for MENAP and CCA economies (Figure 2.10).

### Lessons from case studies
- Case studies examined Afghanistan (1989–2022), Iraq (2003–18), Rwanda (1990–98), and Somalia (1989–ongoing).
- Four important lessons highlighted:
  - Well-coordinated donor assistance—especially when mobilized within the economy’s fiscal frameworks—can enhance the impact of external support (Afghanistan); a formal operational donor coordination mechanism may increase effectiveness (Somalia).
  - Economic stabilization efforts must be accompanied by structural reforms aimed at improving governance and economic liberalization (for example, privatization in Rwanda).
  - Maintaining political stability is essential to sustain reform momentum (Rwanda) and to avoid relapsing into conflict (Afghanistan).
  - International institutions play a role beyond financing through coordination of international support and technical assistance (Iraq); IMF technical assistance was instrumental in Afghanistan for rebuilding fiscal and monetary institutions.
- Caveats from case studies:
  - Success is not guaranteed when overlapping adverse shocks materialize (Iraq) or when persistent security challenges exist (Afghanistan, Iraq, Somalia).
  - Continued engagement and technical assistance supported long-term reconstruction and institutional development in Rwanda.

### Conclusions and policy priorities
- Three core priorities emerge from the chapter’s statistical analysis:
  - Macroeconomic stabilization,
  - Securing external financing—including international support and debt relief,
  - Strengthening institutions.
- The relative importance of these factors to the odds of success is similar across regions, indicating applicability of lessons across MENAP, the CCA, and the rest of the world.
- Additional practical takeaways:
  - Well-coordinated donor assistance can enhance external support impact.
  - Sequencing of policy actions matters, with macroeconomic stabilization the immediate priority (while recognizing that institutional and structural reforms can proceed in parallel but typically take longer to manifest).
  - Political stability is essential to maintain reform momentum.
  - International institutions have an important role beyond financing, through support for institution building and technical assistance.
- Political economy, detailed policy design, and external shocks (global demand, trade policies, financing conditions) can influence recovery outcomes and are avenues for future research.

*International Monetary Fund, October 2025 — Chapter 2, "Boosting Economic Recovery after Conflict: Patterns and Policies"*

### 2. Boosting Economic Recovery after Conflict: Patterns and Policies

### 2. Boosting Economic Recovery after Conflict: Patterns and Policies

### Key cross-cutting themes from case studies
- International coordination and IMF engagement can play a pivotal role in post-conflict recovery by:
  - Coordinating international support, providing financial and technical assistance, and helping authorities build a sound macroeconomic framework and institutional capacity for fiscal and monetary policies. (Iraq)
  - Ensuring predictability of support through instruments such as donor-managed country funds that enable sustained capacity development support. (Somalia)
- Strong domestic ownership of reform strategies is essential for durable recovery and to unlock international assistance and debt relief.
- Sequencing reforms—prioritizing fiscal consolidation, institution building, and governance—anchors donor confidence, stabilizes macroeconomies, and enables subsequent market liberalization.
- Progress is long-term and conditional on continued reform ownership, adaptation to shocks (including security challenges and commodity price fluctuations), and sustained international engagement.

### Iraq — role of IMF and limits of recovery in resource-dependent, conflict-affected states
- IMF-supported programs:
  - Coordinated international support and provided financial and technical assistance.
  - Helped establish a track record of reform commitment, paving the way for substantial debt relief.
- Debt relief outcome:
  - Stock of debt held by Paris Club creditors was reduced by 80 percent in three phases, contingent on the successful approval and completion of IMF programs.
- Constraints and lessons:
  - External shocks—especially fluctuations in oil prices—and prolonged security challenges repeatedly tested authorities’ ability to maintain macroeconomic stability.
  - Key lesson: recurring security challenges in resource-dependent states can prolong conflict, derail reform, and hinder a durable recovery.

### Rwanda (1990–98) — early institutional reform and sequenced structural reforms
- Political and institutional milestones:
  - Adopted a new constitution in 2003.
  - Between 1997 and 2004, 27 key reforms were implemented.
- Reform priorities and instruments:
  - Prioritized fiscal consolidation and institution building before broader market liberalization.
  - Strengthened budget transparency, reduced the state’s economic footprint through privatization, and introduced a system of foreign exchange auctions that helped the central bank achieve a market-clearing exchange rate without excess volatility.
- Outcomes and debt relief:
  - Stabilized the macroeconomy and regained control over public finances.
  - Reached the Heavily Indebted Poor Countries decision point in 2000.
  - Qualified for the Multilateral Debt Relief Initiative in 2006, resulting in external debt reduction exceeding $1 billion.
- Takeaways:
  - Establishing strong fiscal institutions and governance frameworks early provides a stable foundation for recovery.
  - A firm commitment to reform, sustained political stability, international support, and strong local ownership create a durable foundation for recovery.

### Somalia (1989–Ongoing) — gradual rebuilding with sustained international engagement
- Political and institutional milestones:
  - 2008 Djibouti Agreement and the 2012 Provisional Constitution established a federal framework enabling renewed external support and space for state-building.
  - Since then, Somalia has held three national elections with peaceful transfers of power, though political settlement remains incomplete and security challenges persist.
- International support and financing:
  - United Nations and African Union missions provided security and protection for key infrastructure.
  - Bilateral partners supported training and logistics for national security forces.
  - Multilateral and bilateral partners supplied sizable grant financing, alongside coordinated support from the IMF and World Bank.
  - A major milestone in 2023: $4.5 billion in debt relief under the Heavily Indebted Poor Countries Initiative, restoring external sustainability and unlocking further financing.
  - Donor contributions to the Somalia Country Fund have been instrumental in ensuring the IMF’s sustained provision of capacity development support.
- Reform implementation and outcomes:
  - Since 2016, more than 100 structural measures implemented under IMF-supported programs, alongside reforms supported by the World Bank and other partners.
  - Reform areas: tax policy and administration, public financial management, debt management, financial regulation and supervision, anti-money laundering and countering the financing of terrorism, governance, and statistics.
  - Tangible outcomes: improved revenue mobilization, modernized public financial management processes, strengthened central bank capacity, and greater transparency and accountability.
- Lessons:
  - Fragile and conflict-affected states can make progress toward stability and development with strong domestic commitment, predictable international support, and carefully sequenced reforms.
  - Post-conflict recovery is a long-term process requiring adaptability and close collaboration between domestic stakeholders and international development partners.

*International Monetary Fund, October 2025*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2025/october/english/ch2.pdf_