IMF concludes second review of staff-monitored program for Somalia

The International Monetary Fund has recently concluded the final review of the Staff Monetary Program for Somalia, assessing the country's economic performance and highlighting both challenges and achievements. Despite facing the impact of a severe drought in 2016, Somalia showed resilience with its economy growing by 3.2%, driven by strong performance in the telecommunication, construction, and service sectors. CNBC Africa had the opportunity to speak with Mohammed Elhaj, Mission Chief at the International Monetary Fund, to gain insights into Somalia's progress under IMF programs. Elhaj emphasized the difficulties Somalia faces, starting from a low institutional and human capital base. The Staff Monetary Program aims to assist Somalia in building institutions and developing fiscal and monetary policies. He expressed satisfaction with the overall performance and announced the conclusion of the second review under the program, as well as the agreement on a successor program for the next 12 months. In terms of meeting benchmarks, Elhaj mentioned that by the end of 2016, all but one of the structural benchmarks had been observed, and five out of the six indicative targets had been met. He outlined the focus on strengthening macroeconomic agreements, including initiatives such as fiscal reforms, tax base expansion, and enhancing central bank capacities for more active monetary policies. One crucial aspect of the program is public financial management, which involves budget preparation, transparency, and improved cash management. These elements are vital for enhancing Somalia's economic governance and financial stability moving forward. Addressing the issue of currency, Elhaj highlighted the prevalence of counterfeit currency in circulation, with 98% of existing currency being fake. Somalia has not issued its own currency since 1990, leading to various regions issuing their own currencies independently. The IMF has provided technical assistance and a detailed roadmap for Somalia to reintroduce its currency successfully. This roadmap includes considerations for managing the existing counterfeit currency, developing monetary instruments, and establishing an exchange rate system. Overall, the IMF, in collaboration with Somalia's central bank, is working towards a comprehensive plan to ensure the successful launch of a new currency, which will be a significant step towards stabilizing the country's economy and financial system.