International Monetary Fund (IMF) Management Complete the First Review Under the Staff-Monitored Program with Somalia

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IMF staff commends the authorities for implementing key reforms and for satisfactory performance under the fourth Staff-Monitored Program (SMP); Maintaining strong performance and support from international partners will pave the way for Somalia to receive debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative; The IMF supports Somalia’s efforts to secure debt relief and is working with its members to secure the financial resources necessary to cover the IMF’s costs of debt relief.

On September 23, 2019, the Management of the IMF completed the first review under the fourth Staff-Monitored Program [1] (SMP IV) with Somalia, which covers the period May 2019–July 2020. Reforms in SMP IV focus on further efforts to mobilize revenues, including across the Federal Member States, strengthen public financial management, enhance financial sector stability, and strengthen compliance with the framework for anti-money laundering/ combatting the financing of terrorism.

The authorities’ strong commitment and program implementation has strengthened capacity despite a challenging environment. Sustaining the stated commitment of the Finance Ministers of all the Federal Member States (FMS) to the goals of the program will be critical to mitigating program implementation risks.

Underlying economic growth remains stable, supported by donor support and the ambitious and broad reform agenda. However, insecurity and recurring drought represent key risks to the outlook, and, despite progress, growth is insufficient to substantially reduce poverty.

The fiscal policy framework continues to strengthen, with domestic revenue mobilization reaching $126 million in the year to July 2019 exceeding the indicative target of $111 committed to in the program. Continued progress on public financial management, including to strengthen expenditure controls and pass the updated Public Financial Management Law, will be key to continuing to improve governance and donor confidence.

Financial stability reforms are deepening. New mobile money regulations are welcome, and implementation will be key for supporting financial stability. Continued efforts to expand the operational and organizational capacity of the Central Bank of Somalia will underpin further development of the financial sector more broadly.

Reducing Somalia’s debt to sustainable levels under the Heavily Indebted Poor Countries (HIPC) Initiative and normalizing relations with international financial institutions will unlock access to additional financial resources to address Somalia’s development needs. Achieving this goal in a timely manner will require a concerted effort on the part of both the authorities and the international community. To reach the HIPC Decision Point, the authorities are developing the necessary track-record in the context of the SMP IV, and work on the authorities’ ninth National Development Plan, which will form Somalia’s interim poverty reduction strategy, is complete. Securing sufficient financing commitments for arrears clearance and debt relief is also required. The IMF fully supports this goal and is working with its membership to secure the necessary financial resources to cover the IMF’s costs of debt relief.

Table 1. Somalia: Selected Economic and Financial Indicators, 2015–22

(Main Export: Livestock)

Proj.

2015

2016

2017

2018

2019

2020

2021

2022

National income and prices

Nominal GDP in millions of U.S. dollars

4,049

4,198

4,509

4,721

4,958

5,218

5,507

5,816

Real GDP, annual percentage change

3.5

2.9

1.4

2.8

2.9

3.2

3.5

3.5

Per capita GDP in U.S. dollars

310

313

327

332

339

347

357

368

Consumer prices (e.o.p., percent change)

0.3

1.2

6.1

3.2

4.0

3.0

2.5

2.2

Central government finances 1/

Revenue and grants

3.5

4.1

6.0

5.7

6.9

7.2

7.4

7.7

of which:

Grants

0.7

1.4

2.8

1.8

3.0

2.9

2.9

2.8

Expenditure, of which:

3.3

4.1

6.6

5.7

6.9

7.0

7.2

7.5

Compensation of employees 2/

1.3

1.3

2.8

3.0

3.2

3.3

3.4

3.5

Purchase of non-financial assets

0.1

0.2

0.1

0.2

0.5

0.4

0.4

0.3

Overall fiscal balance

0.0

0.0

-0.6

0.0

0.1

0.2

0.2

0.2

Drawdown of government deposits

0.0

0.0

0.7

0.1

0.0

0.0

0.0

0.0

Overall balance, net

0.1

0.0

0.1

0.2

0.1

0.2

0.2

0.2

Stock of domestic arrears

1.7

1.8

1.5

1.5

1.3

1.1

0.8

0.6

Central bank summary balances

Foreign assets (gross)

68.6

60.9

89.2

#VALUE!

Gross reserves of the central bank

42.6

41.8

48.1

51.1

Net foreign assets, excl. IMF 3/

21.6

21.6

24.0

11.3

CBS liabilities to government

7.0

5.0

29.0

39.5

Balance of payments

Current account balance

-8.3

-9.4

-9.8

-10.3

-12.8

-12.7

-13.1

-13.7

Trade balance

-75.2

-74.4

-86.7

-84.8

-87.1

-84.2

-81.8

-78.8

Exports of goods and services

25.6

25.2

22.6

23.7

23.0

22.8

21.9

21.8

Imports of goods and services

100.7

99.6

109.2

108.5

110.1

107.0

103.7

100.6

Remittances

32.9

32.5

31.5

31.3

30.9

31.2

31.4

30.8

Grants

34.9

33.3

46.1

43.9

44.1

41.0

38.0

35.1

Foreign Direct Investment

7.4

7.9

8.2

8.6

9.0

8.9

9.0

9.1

External debt

108.2

105.3

103.3

99.5

99.5

99.5

99.4

99.3

Market exchange rate (SOS/USD, e.o.p.)

22,285

24,005

23,605

24,475

Sources: Somali authorities; and Fund staff estimates and projections.

1/ Budget data for the Federal Government of Somalia. Fiscal operations are recorded on a cash basis. GDP data cover the entire territory of Somalia.

2/ Increase in compensation of employees in 2017 reflects the bringing onto budget military spending related to the loss of an

off-budget grant.

3/ Program definition per TMU ¶9.

[1] An SMP is an agreement between country authorities and Fund staff to monitor the implementation of the authorities’ economic program. SMPs do not entail endorsement by the IMF Executive Board. The SMP is supported by quantitative performance measures, indicative targets and structural measures.

Distributed by APO Group on behalf of International Monetary Fund (IMF).

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