## 1somea2023006

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### Overview
- This Joint Staff Advisory Note (JSAN) reviews the mid-term review report (MTR) of Somalia’s Ninth National Development Plan (NDP9).
- NDP9 covers 2020–2024 and is organized around four pillars: Inclusive Politics, Security and the Rule of Law, Economic Development, and Social Development.
- NDP9 was submitted to the IMF and World Bank on October 15, 2019, to fulfill the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative’s poverty reduction strategy requirement.
- The first Annual Progress Report (APR) was received by the World Bank and the IMF in June 2022, and a JSAN was prepared and submitted to the Boards in July 2023.
- The MTR tracks progress of the first 30 months of NDP9 implementation and serves as APR for 2021 and 2022, identifies gaps, challenges, and lessons learned, and makes practical recommendations for improvement in the implementation of NDP9’s final phase from 2023 to 2024.

### Shocks, humanitarian impacts, and implementation slowdown
- Findings:
  - Desert locust infestation, persistent drought, the COVID-19 pandemic, and global food and fuel price increases due to Russia’s invasion of Ukraine affected Somalia since 2020.
  - Number of people facing food insecurity due to the drought rose from 3.2 million in January 2022 to 5.6 million by end-2022.
  - Parliamentary and Presidential elections delayed (supposed to commence by end-2020, completed in May 2022), affecting timing of external grant disbursements.
  - NDP9 implementation slowed considerably in 2021 and 2022.
- Mitigating measures:
  - Country Preparedness and Response Plan (CPRP) implementation with international support.
  - Fiscal and financial support measures in 2020: temporary tax relief on some basic food commodities (lifted in 2021); externally funded temporary expansion of the social safety net; lending-support to small and medium-sized enterprises; inter-governmental fiscal transfers to FMS.
  - Baxnaano social safety net program: provides unconditional cash transfers to 200,000 households; temporarily expanded to another 155,000 households for 6 months in 2022; Baxnaano topped-up the monthly cash benefit with an additional US$40 (to reach US$60 per month) for the existing 200,000 regular beneficiaries and provided a monthly flat benefit of US$60 for the 155,000 households for up to 6 months.
  - Remittance inflows increased by 60 percent between 2019 and 2022.

### Macroeconomic performance, growth, inflation, and external balances
- Key statistics and trends:
  - Growth recovered to 3.3 percent in 2021.
  - Growth slowed to 2.4 percent in 2022.
  - Inflation rose from 4.3 percent in 2020 to 6.8 percent in 2022.
  - Remittances and credit growth supported 2021 activity; moderation in remittances and drought weighed on 2022.

### Fiscal policy and public financial management (PFM)
- Revenue and financing:
  - Domestic revenues increased from about 2.3 percent to 2.5 percent of GDP between 2020 and 2022.
  - External grants finance roughly half of the budget.
  - Most grant financing remains off-budget (more than 70 percent in 2020).
- Reforms and implementation:
  - Customs modernization and full implementation of the Somalia Customs Automated System (SOMCAS) in Mogadishu.
  - New spectrum fees for telecom operators; new turnover taxes with more than 2,500 registered taxpayers.
  - Regular reporting on tax expenditures; point of sale machines in tourism; several rounds of tax audits.
  - Publication of audited financial statements of the FGS and reporting improvements by FMS.
  - Issuance of PFM Act regulations on debt, public investment, and natural resource management (approved by Cabinet in May 2022).
  - Implementation of expenditure controls through the Somalia Financial Management Information System (SFMIS), including invoice tracking for electricity and internet.
  - Approval of the Pay and Grade Policy and progress on integrating compensation into the single payroll in SFMIS; measures to ensure only the MoF can change payroll entries with financial implications.
  - Issuance of guidelines on emergency procurement and new standard operating procedures for the Inter-Ministerial Concessions Committee.
  - Amendment of the PFM Regulations to implement PFM Act provisions on public property and issuance of the Asset Management Guidelines.
- Staff recommendations:
  - Accelerate domestic revenue mobilization through timely implementation of tax policy, further automation of tax processes, and administrative reforms.
  - Enhance the accounting system, develop reliable in-year financial reporting, improve fiscal data quality, strengthen debt management capacity (including debt risk assessments), and public investment management capacity.
  - Encourage development partners to channel aid through country systems and timely reporting on activities; promote Use of Country Systems (UCS) and Aid Information Management System (AIMS).

### Federal fiscal framework and intergovernmental arrangements
- Progress:
  - Intergovernmental transfer formula agreement for budget support; harmonized chart of accounts and reporting format adopted by FGS and FMS; harmonized Tax Identification Number (TIN) structure agreed at technical level.
  - Harmonization implemented in four of the FMS.
  - March 2023 National Consultative Council agreements on creating a National Revenue Authority, revenue responsibility assignments, and a pool of revenues to be shared.
  - July 2023 agreement on distribution of external budget support among FGS, four FMS, and the Mayor of Mogadishu.
- Remaining issues:
  - Full agreement with all five FMS on revenue sharing and expenditure responsibilities still needs to be achieved.
- Policy recommendation:
  - Implement a sustainable federal fiscal framework, institute a rule-based formula for revenue sharing linked to clear expenditure responsibilities to narrow fiscal gaps and increase citizen trust.

### Monetary and financial sector policies, inclusion, and stability
- Institutional and regulatory advances:
  - CBS modernization in organization, governance, accounting, auditing, and risk management; audited CBS financial accounts are published regularly.
  - Banking regulations on capital and liquidity requirements; guidance for Islamic bank financial reporting and Shariah bank governance framework; mobile money regulations.
  - Launch of the National Payment System in 2021.
  - Operationalization of the National AML/CFT Taskforce; enactment of the Targeted Financial Sanctions Law; publication of the National Risk Assessment (NRA) on ML/FT and the NRA Action Plan; guidance to commercial banks on customer due diligence and reporting of large cash and suspicious transactions.
- Financial inclusion and constraints:
  - Somalia is a de-facto dollarized economy for financial assets and liabilities and currency in circulation.
  - Approximately 82 percent of the Somali population 15 years of age and older use mobile money services.
  - In 2022 credit to private sector was less than 5 percent of GDP.
  - Constraints: narrow formal sector, limited financial depth, lack of supportive financial infrastructure, fragile correspondent banking relations affecting money transfer businesses (MTBs).
- Staff recommendations:
  - Strengthen supervisory capacity (additional resources and training), improve data quality, bolster payment system infrastructure and oversight, strengthen enforcement capacity.
  - Build capacity to address ML/FT risks and enhance customer due diligence; protect from cybersecurity risks.
  - Support currency reform to reintroduce the Somali shilling as legal tender by replacing old and counterfeit notes with development of appropriate monetary and exchange rate policy frameworks and strengthening CBS and financial institution capacity.
  - Note: March 2023 enactment of the Data Protection and the Digital ID Laws and the launch of the National ID in September 2023.

### Financing, costing, and donor coordination for NDP9
- Costing and budgeting:
  - Costing of NDP9 priorities completed for the Supplementary Budget of FY2023 and Budget FY2024; costing for FY2021 and FY2023 welcomed.
  - In 2020 the Ministry of Finance interacted with 16 federal spending entities to cost NDP9 development programs and linked financing with NDP9 programs in the FY2021 Appropriation Act.
  - No costing undertaken in FY2022.
  - Staffs emphasize refining the costing exercise so NDP9 implementation efforts are prioritized, sequenced, and matched with planned expenditures.
- Donor coordination and off-budget aid:
  - More than 70 percent of grant financing was off-budget in 2020.
  - Establishment of the Aid Coordination Office and the Somalia Aid Information Management System welcomed.
  - Staffs encourage development partners to channel aid through country systems, reduce off-budget financing, and provide complete and timely reporting on their activities.

### Poverty reduction, social protection, health, and education
- Social protection and poverty:
  - Actual budget spending on social benefits in 2022 was US$189 million, more than three times the amount spent in 2020 (US$62 million).
  - Baxnaano program: regular long-term unconditional cash transfers covering 200,000 households with children aged under five years; provided emergency cash transfers to support 338,000 drought affected households and 260,000 locust affected households.
  - Unified Social Registry (USR) functionality achieved in July 2023.
- Poverty data and statistics:
  - Somalia National Bureau of Statistics (SNBS) launched the Poverty and Inequality Report based on the Somali Integrated Household Budget Survey (SIHBS) data conducted in 2022.
  - SNBS estimated national poverty using the national poverty line of $2.06 per person per day; the report shows 54.4 percent of the Somali population live below that national poverty line.
  - Poverty rates are lower among urban households; the nomadic population has the highest rates of poverty, with over three-quarters living below the poverty line.
  - Since the 2022 SIHBS is the first household budget survey since 1985, inference about poverty trends during the NDP9 implementation period cannot be drawn; therefore, the reported poverty reduction in the MTR is not accurate.
- Education and health:
  - Education: hiring of 3,000 teachers; agreement between FGS and FMS MoEs on curriculum and examinations roles; staff urge urgent implementation of the National Assessment System and consider direct financing mechanisms to increase enrollments.
  - Health: updates to Essential Package of Health Services Framework (EPHS 2020), Somalia Health Sector Strategic Plan 2022-2026 (HSSP III), Somalia Health Sector Investment Case (2022-2026); establishment of the National Health Professionals Council (NHPC); enactment of the National Medicines Regulatory Authority Bill. Staffs encourage expedited implementation and enhanced FGS-FMS collaboration.

### Pillar-specific progress and recommendations
- Pillar 1: Inclusive Politics
  - Achievements: National Local Government Capacity Development Policy, Local Government Act, National ID and Public Registration Act; progress on fiscal federalism measures and harmonization.
  - Challenges: lack of public awareness, unclear institutional roles, political tensions, security uncertainties, corruption.
  - Recommendation: institute a rule-based formula for revenue sharing linked to clear expenditure responsibilities.
- Pillar 2: Security and the Rule of Law
  - Achievements: government offensives reportedly liberated 70 towns and villages; more soldiers trained ahead of ATMIS exit by December 2024; African Union force handed over seven bases to Somali Security Forces.
  - Anti-corruption measures: accession to UNCAC (August 2021), ratification of regional conventions, National Anti-Corruption Strategy published, Audit Law enacted, Petroleum Law and Extractive Industries Fiscal Regime Law enacted (Extractive Industries Fiscal Regime Law enacted in June 2023).
  - Justice sector: legal aid to over 10,000 beneficiaries (55 percent women); recruitment of 40 judges and 40 judge assistants.
  - Recommendation: sustain reporting on NACS implementation, status of the Anti-Corruption Commission, and UNCAC compliance; careful management of security spending and procurement processes.
- Pillar 3: Economic Development
  - Achievements: Fisheries Law enacted; Company Act regulations issued (January 2021 and May 2022); electricity sector reforms with Electricity Act enacted March 8, 2023, and ESP Licensing and Tariff Regulations approved.
  - Water and energy: National Water Resources Strategy (NWRS) and Roadmap 2021–2025; Water Sector Coordination Facility launched; National Electricity Authority (NEA) established in June 2023.
  - Transport and infrastructure: control of airspace milestones; new port in Garacaad under private financing; need for cross-agency coordination for linear infrastructure.
  - Digital sector: interconnection enabling cross-network calls and payments; recommendation to broaden ICT/digital sector assessment to include national ID, cybersecurity, data protection, and national data center development.
- Pillar 4: Social Development
  - Achievements: Baxnaano program and USR; progress in education and health policy frameworks.
  - Recommendation: institutionalize Baxnaano, expand the unified social registry linking national ID, seek external grants to continue Baxnaano beyond June 2024, and introduce human capital and labor market interventions.

### Implementation, monitoring & evaluation, and data
- Data and statistical capacity:
  - IMF e-GDDS implemented in June 2022; publication of essential macroeconomic and financial data via a National Summary Data Page.
  - Somalia Integrated Statistics and Economic Planning Capacity Building Project (SISEPCBP) supports SNBS, MED in MoPIED, and statistical offices of MDAs.
  - 2022 SIHBS used to rebase GDP and will be used to update the CPI basket in 2024.
  - Facts and Figures of Somalia published for 2018, 2019, 2020, and 2021.
- Monitoring and evaluation:
  - MED developed a National Integrated Monitoring and Evaluation Framework (NIMEF).
  - Recommendation: strengthen linkages with MOF and SNBS, strengthen communication and stakeholder consultation at FGS and FMS levels to raise NDP9 awareness, gather feedback, and support NDP10 preparation.
- HIPC Completion Point status (progress as of end October 2023):
  - As of September 2023 the government has completed 13 of 14 Completion Point triggers.
  - Trigger assessments (selected highlights):
    - Poverty Reduction Strategy Implementation: Assessment: Met.
    - Macroeconomic Stability (3-year ECF-supported program): Assessment: Met.
    - Publish at least two years of audited FGS financial accounts: Assessment: Met (2019, 2020, 2021, and 2022 published).
    - Issue PFM Act regulations on debt, public investment, and natural resource revenue management: Assessment: Met.
    - Adopt and apply a single import duty tariff schedule: Assessment: Not completed but satisfactory progress has been made.
    - Extractive Industries Fiscal Regime Law enacted: Assessment: Met (June 2023).
    - Acceded to UNCAC: Assessment: Met (August 2021).
    - Publish at least four consecutive quarterly debt reports: Assessment: Met (since 2020Q4).
    - Establish national unified social registry functionality: Assessment: Met (July 2023).
    - FGS and FMS MoEs agreement on roles: Assessment: Met (July 14, 2021).
    - Somalia Electricity Act enacted: Assessment: Met (March 8, 2023).
    - Company Act implementing regulations on minority shareholder protection: Assessment: Met (January 2021 and May 2022).
    - Publish at least two editions of the Somalia Annual Fact Book: Assessment: Met.

### Major risks and JSAN / Staff recommendations
- Major implementation risks:
  - Insecurity impeding basic public services and development.
  - Lack of policy prioritization and absence of full costing aligned with FGS and FMS fiscal frameworks.
  - Political risks: lack of full consensus on the federal system and election process uncertainty.
  - Corruption and weak governance; ensuring sound PFM in line with PFM laws and regulations.
  - Heavy reliance on off-budget donor support and absence of coherent aid policy strategy.
  - Revenue collection risks: tax administration capacity to ensure registration, filing, declarations, and payments.
  - Severe capacity constraints in newly created institutions.
  - External shocks, including climate change.
- Staff recommendations (summary):
  - Defend fiscal sustainability; strengthen capacity for public debt management and debt risk assessments; align future borrowing with repayment capacity and medium-term fiscal sustainability.
  - Accelerate domestic revenue mobilization.
  - Strengthen public financial management and public investment management to improve expenditure, transparency, and accountability.
  - Enhance transparency and accountability; step up efforts to reduce corruption.
  - Carefully manage the security sector and ensure resources are adequate and timely.
  - Promote tangible progress on electoral reforms to support political inclusion and representation.
  - Catalyze climate leadership across government in NDP9 implementation.
  - Monitor progress on recommendations and risks; advise IMF and IDA Executive Directors on further NDP9 implementation.
  - Encourage timely development of a streamlined and realistic NDP10 expected in 2025, drawing on NDP9 lessons and staff recommendations.

*Source: INTRODUCTION and subsequent sections, JSAN reviewing the mid-term review report (MTR) of Somalia’s Ninth National Development Plan (NDP9).*

### INTRODUCTION

### INTRODUCTION

### Overview
- This Joint Staff Advisory Note (JSAN) reviews the mid-term review report (MTR) of Somalia’s Ninth National Development Plan (NDP9).
- NDP9 covers 2020–2024 and is organized around four pillars: Inclusive Politics, Security and the Rule of Law, Economic Development, and Social Development.
- NDP9 was submitted to the IMF and World Bank on October 15, 2019, to fulfill the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative’s poverty reduction strategy requirement.
- The first Annual Progress Report (APR) was received by the World Bank and the IMF in June 2022, and a JSAN was prepared and submitted to the Boards in July 2023.
- The MTR tracks progress of the first 30 months of NDP9 implementation and serves as APR for 2021 and 2022, identifies gaps, challenges, and lessons learned, and makes practical recommendations for improvement in the implementation of NDP9’s final phase from 2023 to 2024.

### Shocks, humanitarian impacts, and implementation slowdown
- Somalia faced multiple shocks since 2020: desert locust infestation, persistent drought, the COVID-19 pandemic, and global food and fuel price increases due to Russia’s invasion of Ukraine.
- Food insecurity: the number of people facing food insecurity due to the drought rose from 3.2 million in January 2022 to 5.6 million by end-2022.
- Political delays: Parliamentary and Presidential elections delayed (supposed to commence by end-2020, completed in May 2022), affecting timing of external grant disbursements.
- Consequence: NDP9 implementation slowed considerably in 2021 and 2022.

### Progress on HIPC Completion Point, climate change, and revenue mobilization
- As of September 2023 the government has completed 13 of 14 Completion Point triggers.
- The MTR pays attention to climate change impacts and climate resilience; climate change is recognized as a critical challenge and efforts are being made to make projects and programs climate responsive.
- Domestic revenue mobilization: rates of tax and revenue collection are low; the MTR discusses areas to increase revenue largely through fees (fisheries, civil aviation, and petroleum).
- A costing exercise of NDP9 was conducted for the 2023 Supplementary Budget and the 2024 Budget.

### Macroeconomic performance — summary of shocks and mitigation
- Adverse shocks included flooding, desert locust infestation, and the Covid-19 pandemic; five consecutive failed rainy seasons from late 2020 to end 2022 and a surge in global prices increased food insecurity to a third of the population (5.6 million people) by end-2022.
- Mitigating factors:
  - Policy response: implementation of the Country Preparedness and Response Plan (CPRP) with international support; fiscal and financial support measures in 2020 included temporary tax relief on some basic food commodities and externally funded temporary expansion of the social safety net, lending-support to small and medium-sized enterprises, and inter-governmental fiscal transfers to FMS. The temporary tax relief was lifted in 2021. Baxnaano social safety net program: provides unconditional cash transfers to 200,000 households; temporarily expanded to another 155,000 households for 6 months in 2022; Baxnaano topped-up the monthly cash benefit with an additional US$40 (to reach US$60 per month) for the existing 200,000 regular beneficiaries and provided a monthly flat benefit of US$60 for the 155,000 households for up to 6 months.
  - Remittance inflows: remittance inflows increased by 60 percent between 2019 and 2022; helped alleviate household impacts in 2020 and 2021.

### Growth, inflation, and external balances
- Growth recovered to 3.3 percent in 2021, driven by household consumption and private investment, supported by remittance inflows and credit growth.
- Economic activity slowed to 2.4 percent in 2022 due to the global economic slowdown, moderation in remittance inflows, and domestic drought conditions.
- Inflation rose from 4.3 percent in 2020 to 6.8 percent in 2022, influenced by escalating global food and fuel prices.

### Fiscal policy and public financial management
- Domestic revenues increased from about 2.3 percent to 2.5 percent of GDP between 2020 and 2022, due to tax policy and revenue administration reforms, but tax receipts remain the lowest among Sub-Saharan Africa and Somalia is heavily reliant on external grants, with external grants financing roughly half of the budget.
- Noted reforms and measures:
  - Customs modernization and full implementation of the Somalia Customs Automated System (SOMCAS) in Mogadishu.
  - Implementation of a new spectrum fees for telecom operators.
  - Implementation of new turnover taxes, with more than 2,500 registered taxpayers.
  - Regular reporting on tax expenditures.
  - Revenue administration efforts including point of sale machines in the tourism sector and several rounds of tax audits.
- Staffs recommend accelerating domestic revenue mobilization through timely implementation of tax policy, further automation of tax processes, and other administrative reforms identified in NDP9 and the proposed new ECF-supported program.
- Public financial management improvements:
  - Regular publication of audited financial statements of the FGS and improvements in reporting by FMS.
  - Issuance of the Public Financial Management (PFM) Act regulations on debt, public investment, and natural resource management.
  - Implementation of expenditure controls through the Somalia Financial Management Information System (SFMIS), including invoice tracking for electricity and internet.
  - Approval of the Pay and Grade Policy and progress on integrating compensation into the single payroll in SFMIS; measures to ensure only the MoF can change payroll entries with financial implications.
  - Issuance of guidelines on emergency procurement and new standard operating procedures for the Inter-Ministerial Concessions Committee.
  - Amendment of the PFM Regulations to implement PFM Act provisions on public property and issuance of the Asset Management Guidelines.
- Staffs encourage further improvements: enhancing the accounting system, developing reliable in-year financial reporting, improving fiscal data quality, strengthening debt management capacity (including debt risk assessments), and public investment management capacity.

### Federal fiscal framework and intergovernmental agreements
- Discussions between the FGS and FMS on fiscal federalism architecture are in train.
- Ministry of Interior initiatives: Intergovernmental Relations Bill (at an advanced stage), National Decentralization Strategy, initiative to support devolution and power allocation agreement implementation.
- March 2023 National Consultative Council agreements between FGS, four FMS, and the Mayor of Mogadishu on creating a National Revenue Authority, revenue responsibility assignments across levels of government, and the pool of revenues to be shared.
- July 2023 agreement among the same group on distribution of external budget support.
- Full agreement with all five FMS on revenue sharing and expenditure responsibilities still needs to be achieved.
- Staffs emphasize implementing a sustainable federal fiscal framework to support political stability, security, and development goals.

### Monetary and financial sector policies
- Central Bank of Somalia (CBS) modernization on organization, governance, accounting, auditing, and risk management; audited financial accounts of the CBS are being published regularly.
- Financial regulation advances:
  - Banking regulations on capital and liquidity requirements covering risk management aspects.
  - Guidance for Islamic bank financial reporting and Shariah bank governance framework.
  - Mobile money regulations.
  - Launch of the National Payment System in 2021.
- AML/CFT actions:
  - Operationalization of the National AML/CFT Taskforce.
  - Enactment of the Targeted Financial Sanctions Law and issuance of related regulations.
  - Publication of the National Risk Assessment (NRA) on money laundering and financing of terrorism (ML/FT) and the NRA Action Plan.
  - Issuance of guidance to commercial banks on customer due diligence and reporting of large cash and suspicious transactions.
- Staffs recommend further strengthening supervisory capacity (additional resources and training), improving data quality, bolstering payment system infrastructure and oversight, and strengthening enforcement capacity.
- Financial inclusion and dollarization:
  - Somalia is a de-facto dollarized economy for financial assets and liabilities and currency in circulation.
  - Approximately 82 percent of the Somali population 15 years of age and older use mobile money services.
  - In 2022 credit to private sector was less than 5 percent of GDP.
  - Constraints include a narrow formal sector, limited financial depth, lack of supportive financial infrastructure, and fragile correspondent banking relations affecting money transfer businesses (MTBs).
- Staffs urge measures to strengthen financial deepening and inclusion while protecting financial stability, build capacity to address ML/FT risks and enhance customer due diligence, and take steps to protect from cybersecurity risks.
- March 2023 enactment of the Data Protection and the Digital ID Laws and the launch of the National ID in September 2023 are noted as welcome.
- Proposed currency reform to reintroduce the Somali shilling as legal tender by replacing old and counterfeit notes is expected to support financial inclusion; staffs encourage development of appropriate monetary and exchange rate policy frameworks for the currency reform and strengthening CBS and financial institution capacity.

### Financing NDP9 and costing
- Completion of NDP9 costing for FY2021 and FY2023 is welcomed; authorities undertook costing of NDP9 priorities for the Supplementary Budget of FY2023 and Budget FY2024.
- In 2020 the Ministry of Finance interacted with 16 federal spending entities to cost NDP9 development programs and explicitly linked financing with NDP9 programs in the FY2021 Appropriation Act.
- There was no costing undertaken in FY2022.
- Staffs emphasize refining the costing exercise for subsequent budgets so NDP9 implementation efforts are prioritized, sequenced, and matched with planned expenditures.
- Financing challenges:
  - Most grant financing remains off-budget (more than 70 percent in 2020).
  - Staffs encourage development partners to channel aid through country systems to align with NDP9 priorities, enhance visibility, and facilitate monitoring and evaluation.
  - Ministry of Finance has worked with development partners through the Use of Country Systems (UCS) Working Group and promoted the Aid Information Management System (AIMS) to link planned interventions and spending with NDP pillars.
  - Staffs recognize the importance of reducing off-budget financing and encourage complete and timely reporting by development partners on their activities.

### Poverty reduction, social protection, and data
- Pro-poor program implementation of NDP9 and increased pro-poor expenditures since 2020 helped mitigate impacts on the poor.
- Actual budget spending on social benefits in 2022 was US$189 million, more than three times the amount spent in 2020 (US$62 million).
- Baxnaano social protection program:
  - Provides regular long-term unconditional cash transfers covering 200,000 households with children aged under five years.
  - Provided emergency cash transfers to support 338,000 drought affected households and 260,000 locust affected households.
- Poverty monitoring and statistics:
  - In August 2023 the Somalia National Bureau of Statistics (SNBS) launched the Poverty and Inequality Report based on the Somali Integrated Household Budget Survey (SIHBS) data conducted in 2022.
  - The SNBS estimated national poverty using the national poverty line of $2.06 per person per day; the report shows 54.4 percent of the Somali population live below that national poverty line.
  - Poverty rates are lower among urban households compared to rural counterparts; the nomadic population experiences the highest rates of poverty, with over three-quarters living below the poverty line.
  - Since the 2022 SIHBS is the first household budget survey since 1985, inference about poverty trends during the NDP9 implementation period cannot be drawn; therefore, the reported poverty reduction in the MTR is not accurate.

*Source: INTRODUCTION, JSAN reviewing the mid-term review report (MTR) of Somalia’s Ninth National Development Plan (NDP9).*

### 15.      At the same time, staffs emphasize the importance of enhancing the availability,

### PROGRESS DURING THE FIRST HALF OF NDP9 IMPLEMENTATION

### Pillar 1: Inclusive Politics
- Key developments:
  - Deepening of federalism; laws and policies formulated include the National Local Government Capacity Development Policy, Local Government Act, the National ID and Public Registration Act.
  - Fiscal federalism progress since 2020 through: (1) agreement on an intergovernmental transfer formula for budget support; (2) adoption of the harmonized chart of accounts and reporting format by the FGS and FMS; and (3) agreement at technical level of the harmonized Tax Identification Number (TIN) structure.
  - Harmonization of the chart of accounts and reporting format implemented in four of the FMS.
- Challenges and risks:
  - Lack of public awareness and unclear institutional roles, causing conflicts between political actors in the FGS and FMS.
  - Political tensions, security uncertainties, and delay in federal elections impeded implementation.
  - Corruption undermines NDP9 implementation; competition between FGS and armed non-state actors and limited government capacity further impede progress.
- Policy emphasis:
  - Staffs stress the importance of the Inclusive Politics pillar for political stability, inclusive economic growth, and poverty reduction.
  - Recommendation: institute a rule-based formula for revenue sharing and intergovernmental grants—linked to clear expenditure responsibilities—to narrow fiscal gaps (e.g., between states with and without seaports) and increase citizen trust and state legitimacy.

### Pillar 2: Security and the Rule of Law
- Security progress and context:
  - Government offensives reportedly liberated 70 towns and villages.
  - More soldiers are being trained ahead of ATMIS’s exit from Somalia by December 2024.
  - African Union force has handed over seven bases to Somali Security Forces.
  - Country faces extended droughts, a food security crisis, and domestic political tensions.
- Anti-corruption and governance measures:
  - Government efforts include strengthening public financial management, expenditure controls, the Auditor General Office, and biometric registration in the security sector.
  - Specific achievements noted by staffs:
    - Accession to the UN Convention Against Corruption (UNCAC) and ratification of the African Union Convention on Preventing and Combating Corruption and Arab Anti-Corruption Convention.
    - Publication of the National Anti-Corruption Strategy (NACS).
    - Enhanced transparency in regulatory processes (CBS and NCA publishing outcomes of licensing applications for Mobile Network Operators and Mobile Money Operators).
    - Enactment of the Audit Law supporting a federal audit system.
    - Development of legal framework for extractive industries, including enactment of the Petroleum Law and Extractive Industries Fiscal Regime Law.
  - Staffs recommend sustained efforts to report on NACS implementation, status of the Anti-Corruption Commission, and compliance with UNCAC.
- Justice sector:
  - Legal aid provided to over 10,000 beneficiaries (55 percent women).
  - Recruitment of 40 judges and 40 judge assistants to improve access to justice.
  - Final political agreement on the justice and corrections model remains pending.
- Security spending management:
  - Staffs urge careful management of security spending to ensure resources are adequate and timely.
  - Recommendations: maintain security sector registration; resolve incomplete tender processes in NISA; ensure rations delivered under valid, competitively tendered contracts.

### Pillar 3: Economic Development
- Overall assessment:
  - Policy environment strengthened for enabling sectors: water, energy, transport, and digital sector. Programs in place for food security and trade integration.
  - Important reforms include enactment of the Fisheries Law and regulations for the Company Act.
- Water and energy:
  - Ministry of Energy and Water Resources implementing the National Water Resources Strategy (NWRS) and Roadmap 2021–2025; Water Sector Coordination Facility launched to coordinate NWRS and shift support from emergency assistance to long-term programmatic support.
  - Large-scale investments in rainwater harvesting, water reservoirs, and water catchments for rural resilience.
  - Electricity Act promulgated in March 2023; tariff and licensing regulations approved in April 2023; National Electricity Authority (NEA) established in June 2023.
  - Staffs encourage operationalization of the NEA and attention to urban water supply and sanitation.
- Transport and infrastructure:
  - Aviation sector: milestone reached on control of airspace, airport infrastructure upgrades, and strengthened governance.
  - Ports: ongoing construction of new port in Garacaad under private financing; need for governance and coordination across four, soon to be five, maritime ports to avoid unhealthy competition and minimize corruption risks.
  - Recommendation: develop clear project implementation and cross-agency coordination mechanisms for civil works, particularly for joint implementation of linear infrastructure (roads, digital, energy, water) to capture potential savings and benefits.
- Digital sector:
  - Progress in telecommunications enabling interconnection between operator networks and cross-network calls and payments.
  - Future reporting should broaden assessment of ICT/digital sector to include national ID, cybersecurity, data protection, and national data center development.
  - Staffs encourage acceleration of data protection, cybersecurity, and digital ID activities and improved data collection focusing on indicators for digital connectivity and internet access.

### Pillar 4: Social Development
- Social protection:
  - Government response to shocks facilitated by investments in social protection and World Bank financial and technical assistance.
  - Baxnaano program recognized for building and protecting human capital of poor households and addressing shocks.
  - Achievement: Unified Social Registry (USR) functionality as one of the first government managed and implemented systems.
  - Staffs encourage institutionalizing Baxnaano, expanding the unified social registry linking national ID, and introducing human capital and labor market interventions.
  - Financing recommendation: seek external grants to facilitate continuity of Baxnaano’s operations beyond June 2024 to support pro-poor public spending for the remaining years of NDP9.
- Education:
  - Progress includes approving legal and policy frameworks, hiring 3,000 teachers, and agreement between FGS and FMS MOEs on curriculum and examinations roles.
  - Staffs urge urgent implementation of the National Assessment System to assess students' learning levels.
  - Recommendation: consider streamlined mechanisms to directly finance schools to increase enrollments; assess educational infrastructure; use standard indicators such as net and gross enrollment rates for precise monitoring.
- Health:
  - Advances in the health policy framework and program implementation despite COVID-19 setbacks.
  - Key initiatives led by the Federal Ministry of Health and Human Services:
    - Updating the Essential Package of Health Services Framework (EPHS 2020).
    - Somalia Health Sector Strategic Plan 2022-2026 (HSSP III).
    - Somalia Health Sector Investment Case (2022-2026).
    - Establishing the National Health Professionals Council (NHPC).
    - Enacting the National Medicines Regulatory Authority Bill.
  - Staffs encourage expedited implementation of these policies and enhanced FGS-FMS collaboration on service delivery.
- Cross-cutting themes:
  - Climate change: MTR gives greater attention; El Nino phase may temporarily alleviate drought but increase flood risk. Efforts to make projects climate responsive, expand drought-resistant agriculture and water conservation (including subsurface dams).
  - Recommendation: improve coordination between development partners and humanitarian agencies; provide guidance on key climate measures and milestones for next NDP.
  - Gender equality: MTR could further highlight coordination and women’s representation challenges and obstacles faced by gender and human rights bills.

### Implementation, Donor Coordination, and Monitoring & Evaluation
- HIPC Completion Point and donor coordination:
  - Authorities well positioned to achieve the HIPC Completion Point by December 2023.
  - Somalia has achieved 13 of 14 HIPC Completion Point triggers, including public financial and expenditure management, domestic revenue mobilization, governance, social sectors, and statistics.
  - Progress made on the remaining trigger on applying a single import duty tariff schedule; government will request a waiver.
  - Establishment of the Aid Coordination Office and the Somalia Aid Information Management System welcomed to enhance aid coordination and donor harmonization.
  - Remaining needs: reduce duplicate projects and avert aid, improve information sharing, and strengthen transparency and accountability to increase use of country systems and channel resources through the budget.
- Data and statistics:
  - Progress in producing data to monitor NDP9 and strengthening programming and analytical capacity of fiscal agencies.
  - Implementation of IMF e-GDDS in June 2022; publication of essential macroeconomic and financial data via a National Summary Data Page.
  - Somalia Integrated Statistics and Economic Planning Capacity Building Project (SISEPCBP) aims to strengthen SNBS, MED in MoPIED, and statistical offices of MDAs.
  - The 2022 SIHBS was conducted for the first time since 1985 and used to monitor poverty; SNBS released a Poverty and Inequality Report in August 2023.
  - The 2022 SIHBS was used to rebase GDP and will be used to update the CPI basket in 2024.
  - Staffs encourage continued capacity building to analyze data for evidence-based policymaking and use of data in planning and evaluation, including APRs.
- Monitoring and evaluation:
  - Progress in strengthening M&E over the past two years; MED developed a National Integrated Monitoring and Evaluation Framework (NIMEF) to coordinate M&E for NDP9 activities.
  - Recommendation: MED should strengthen linkages with MOF and SNBS to produce appropriate data for monitoring and evaluation; strengthen communication and stakeholder consultation at FGS and FMS levels to raise NDP9 awareness, gather feedback for course correction, and build support for NDP10 preparation.

### Conclusion, Risks, and Recommendations
- MTR assessment:
  - MTR captures key achievements (2020–2022) and ongoing challenges exacerbated by prolonged drought, COVID-19, price hikes from Russia’s invasion of Ukraine, and the protracted election process (2020–2022).
- Major achievements highlighted by staffs:
  - (1) Significant increase in pro-poor expenditures, supported by legal framework and capacity building, implementation of the Baxnaano program, and establishment of the national unified social registry.
  - (2) Improvements in domestic revenue mobilization, including implementation of the SOMCAS, new turnover taxes and spectrum fees, and revenue administration reforms.
  - (3) Improvements in public financial management: enhanced reporting, adoption of the Pay and Grade Policy, progress on payroll integration, publication of PFM regulations, implementation of expenditure controls, strengthened procurement and concessions oversight, and new policies for management of non-financial assets.
  - (4) Financial sector reforms: licensing of mobile money operators, creation of a national payments system, establishment of the AML/CFT taskforce and completion of a national ML/FT Risk Assessment, enactment of the Targeted Financial Sanctions Law and related regulations.
  - (5) Anti-corruption measures: adoption of UNCAC and regional anti-corruption conventions, a National Anti-corruption Strategy and establishment of Independent Anti-Corruption Commission.
  - (6) Strengthened business environment and policy framework for key enabling sectors (aviation, telecommunications, energy).
  - (7) Efforts to improve availability and quality of data and the statistical system.
- Forward-looking recommendations:
  - Build on achievements to sustain reform momentum and foundations for sustained and inclusive growth and poverty reduction.
  - Maximize implementation of priority actions during the last year of NDP9 implementation.

*Source: IMF staff summary of NDP9 Mid-Term Review as presented in the provided content.*

### 35.      NDP9 implementation continues to face significant risks, while some effort to address

### 35.      NDP9 implementation continues to face significant risks, while some effort to address

### Major implementation risks for NDP9
- Insecurity, which could impede provision of basic public services and development.
- Lack of policy prioritization, particularly on expenditure policy and absence of full costing aligned with FGS and FMS fiscal frameworks.
- Political risks, including lack of full consensus regarding the federal system (which creates tensions in the inter-governmental relations) and uncertainty around the process for national elections.
- Corruption and weak governance, and risks associated with ensuring sound public financial management in line with the PFM laws and regulations.
- Heavy reliance on off-budget donor support for financing of the NDP9 combined with an absence of coherent aid policy strategy to catalyze and align large donors’ assistance to support the NDP9.
- Risks related to revenue collection, including ability of the tax administration to ensure adequate registration, filing, declarations, and payments by the private sector.
- Severe capacity constraints, where institutions have only recently been created and staffed with few adequately trained and experienced employees.
- External shocks, including climate change, posing a significant risk to the successful implementation of NDP9.

### JSAN / Staff recommendations to support NDP9 goals
- Defend fiscal sustainability and take steps to strengthen capacity for public debt management and debt risk assessments. Even after reaching the HIPC Completion Point, future borrowing decisions should be aligned with Somalia’s future capacity to repay while maintaining medium-term fiscal sustainability.
- Accelerate domestic revenue mobilization to increase resources to support the implementation of NDP9 priorities.
- Continue to strengthen public financial management and public investment management to improve expenditure, transparency and accountability.
- Enhance transparency and accountability through greater attention to improving governance. In addition, the authorities are encouraged to step up efforts to reduce corruption.
- Ensure that the security sector is carefully managed and that resources are adequate and timely, given the importance of security spending for political and thus economic stability.
- Promote tangible progress on electoral reforms to support greater political inclusion and representation.
- Catalyze climate leadership across the government when implementing NDP9 programs to ensure effective and sustainable development.

### Monitoring, sequencing, and next planning steps
- Staffs will assess progress in implementing these recommendations and the evolution of risks. Combined with annual monitoring data, this information would enable staffs to advise the IMF and IDA Executive Directors on Somalia’s further implementation of the NDP9.
- Staffs encourage the timely development of a streamlined and realistic NDP10, which is expected in 2025. Its preparation may draw on the experience of NDP9, the lessons learnt in implementing NDP9, and the staffs’ recommendations.

### Annex I — Progress on HIPC Completion Point Triggers (progress as of end October 2023)
- Poverty Reduction Strategy Implementation
  - 1. Satisfactory implementation for at least one year of Somalia’s full poverty reduction strategy, as evidenced by an Annual Progress Report on the implementation of the poverty reduction strategy submitted by the government to IDA and the IMF.
    - Assessment: Met. The Annual Progress Report evaluating the implementation of the Ninth National Development Plan (NDP9) covering 2020-24 in 2020 was completed in June 2022. Staffs of the World Bank and IMF issued a Joint Staff Assessment Note (JSAN) confirming satisfactory implementation of the NDP9 during 2020, which was transmitted to the IDA and IMF Executive Boards in July 2023.
- Macroeconomic Stability
  - 2. Maintain macroeconomic stability as evidenced by satisfactory implementation of the 3-year ECF-supported program.
    - Assessment: Met. The fifth review of the ECF-supported program was completed on May 17, 2023. The sixth review and final review will be considered for approval by the IMF Executive Board in December 2023.
- Public Financial and Expenditure Management
  - 3. Publish at least two years of the audited financial accounts of the Federal Government of Somalia (FGS).
    - Assessment: Met. The Office of the Auditor General published the 2019, 2020, 2021, and 2022 FGS financial accounts.
  - 4. Issue regulations to implement the Public Financial Management Act’s provisions on debt, public investment, and natural resource revenue management.
    - Assessment: Met. The PFM regulations—including chapters on debt, public investments, and natural resource revenue management—were approved by the Cabinet in May 2022.
- Domestic Revenue Mobilization
  - 5. Adopt and apply a single import duty tariff schedule at all ports in the Federal Republic of Somalia (to also foster greater trade integration).
    - Assessment: Not completed but satisfactory progress has been made. The customs regulations on valuation and declarations were issued in September 2022 and the ad valorem tariff schedule was enacted in June 2022. The Somalia Customs Automated System (SOMCAS) system has incorporated harmonized tariffs, Harmonized System (HS) codes, and harmonized item descriptions. The SOMCAS system is now fully operational in Mogadishu seaport and airport as of October 2023. In Kismayo seaport and airport, SOMCAS has been partially implemented, as shipping lines and airlines are entering manifests into the system and declarations are being made for khat imports. However, efforts are still ongoing to implement a common valuation table across Mogadishu and Kismayo. Once this is resolved, Kismayo will be able to carry out all the customs processing through SOMCAS. The reform has been paused in the ports of Bosaso and Garowe in the Federal Member State of Puntland due to political conditions.
- Governance, Anticorruption, and Natural Resource Management
  - 6. Enact the Extractive Industry Income Tax Law.
    - Assessment: Met. The Extractive Industries Fiscal Regime Law was enacted in June 2023.
  - 7. Ratify the ‘United Nations Convention Against Corruption’ (UNCAC).
    - Assessment: Met. Somalia acceded to the UNCAC in August 2021.
- Debt Management
  - 8. Publish at least four consecutive quarterly reports.
    - Assessment: Met. Regular quarterly debt bulletins have been published since 2020Q4 with information on the outstanding stock and composition of debt liabilities, including their currency denomination, maturity, interest rate structure and projected debt service and key risk indicators.
- Social Sectors
  - 9. Establish a national unified social registry (USR) as a functional platform that supports registration and determination of potential eligibility for social programs.
    - Assessment: Met. In July 2023, the functionality status of the USR was achieved with the successful completion of all governance, technical and operational requirements that enables Ministry of Labour and Social Affairs (MoLSA) to operate the USR for the intended objective.
  - 10. FGS and Federal Member States (FMS) Ministers of Education (MOE) adopt an agreement defining their respective roles and responsibilities on curriculum and examinations.
    - Assessment: Met. On July 14, 2021, the FGS and FMS MoEs finalized and officially signed the revised education cooperation Memorandum of Understanding (MoU) at the intergovernmental meeting held in Garowe. A permanent intergovernmental forum for education has been formalized. Key agreements reached include the formation of national examination, certification, and curriculum boards. An interim committee to develop the criteria for selection of the board members was also established.
  - 11. FGS and FMS Ministers of Health adopt a joint national health sector strategy.
    - Assessment: Met. The Somalia Health Sector Strategic Plan for 2022-2026 was finalized. FGS and FMS ministers have agreed on a framework for a joint national health strategy.
- Growth/Structural
  - 12. Enact the Electricity Act and issue supporting regulations to facilitate private sector investment in the energy sector.
    - Assessment: Met. The Somalia Electricity Act was enacted on March 8, 2023. Two regulations - the ESP Licensing Regulations and the ESP Tariff Regulations - have also been approved.
  - 13. Issue Company Act implementing regulations on minority shareholder protection to encourage private sector investment.
    - Assessment: Met. The regulations to the Companies Act were issued in January 2021. A second set of Regulations to the Company Act were issued in May 2022 specifically covering the issue of minority shareholder protection.
- Statistical Capacity
  - 14. Publish at least two editions of the Somalia Annual Fact Book.
    - Assessment: Met. The Facts and Figures of Somalia has been published for 2018, 2019, 2020, and 2021.

*Source: IMF staff assessment as presented in the JSAN and MTR reporting on NDP9 implementation.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2023/english/1somea2023006.pdf_