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---

### Macroeconomic outlook and risks
- Inflation is expected to continue on a downward trend to 4.5 percent by end 2024.
- Growth projections: 2024: 4.0 percent; 2025: 4.0 percent; medium term: accelerate to 4.5 percent.
- Real GDP, annual percentage change (selected series): 2.7, 4.2, 3.7, 4.0, 3.9, 4.0, 4.1, 4.1, 4.3, 4.5.
- CPI (period average, percent change, selected): 6.8, 6.2, 4.8, 5.3, 3.9, 4.2, 3.6, 3.4, 3.2, 3.0.
- Near-term risks to the outlook:
  - Climate shocks.
  - Domestic and regional security developments.
  - Lower global growth.
  - Higher commodity prices.
- Program and mitigation: continued program ownership, capacity development assistance, and sustained support from development partners.

### Fiscal policy, revenues, and public finances
- Key fiscal guidance and priorities:
  - Raise domestic revenues to cover operational expenditure by 2027 while maintaining a prudent fiscal deficit and relying on concessional financing.
  - Strengthen domestic revenue mobilization (customs modernization, Income Tax Law implementation, stronger tax enforcement).
  - Strengthen public financial, investment, and debt management and enhance spending efficiency.
  - Conduct careful fiscal impact assessment of wage bill and pension reforms before implementation.
- Central government finances (percent of GDP, selected series):
  - Revenue and grants: 7.1, 6.8, 7.1, 7.5, 5.9, 6.8, 5.1, 4.6, 4.6, 4.7
  - Revenues: 2.6, 3.0, 2.8, 3.0, 2.1, 3.3, 3.6, 3.9, 4.2, 4.5
  - Grants: 4.5, 3.8, 4.3, 4.6, 2.8, 3.5, 1.5, 0.8, 0.5, 0.3
  - Expenditure (FGS): 7.1, 6.7, 7.5, 7.7, 7.2, 8.0, 7.1, 6.9, 6.9, 7.1
  - Compensation of employees: 2.5, 2.7, 2.8, 3.0, 2.7, 2.9, 2.8, 2.7, 2.6, 2.6
  - Purchase of non-financial assets: 0.1, 0.2, 0.3, 0.3, 0.3, 0.3, 0.4, 0.4, 0.6, 1.0
  - Overall balance: 0.0, 0.1, -0.5, -0.2, -1.3, -1.2, -2.0, -2.3, -2.3, -2.4
- Additional fiscal items and 2025 baseline:
  - Domestic revenues increased from 1 percent to 3 percent of GDP between 2013 and 2023.
  - Total external grants finance close to 60 percent of the budget; World Bank provided 88 percent of total grants in 2023.
  - 2024 overall fiscal deficit expected at 0.2 percent of GDP.
  - 2025 baseline overall fiscal deficit: 1.2 percent of GDP (assuming World Bank budget support provided as concessional loans); domestic revenues rising to 3.3 percent of GDP.
  - Authorities plan measures about 0.3 percentage points of GDP for 2025 per the Medium-Term Revenue Roadmap (MTRR).
- Directors’ emphasis: prepare for prospects of declining external grants and sustain fiscal reforms.

### Program performance and structural benchmarks
- Program performance: satisfactory; all performance criteria for this review were met.
- Structural benchmarks: six implemented (three with small delays); authorities request new target dates for two benchmarks:
  - Finalize roadmap to implement the Pay and Grade policies by end-February 2025 (proposed reset).
  - Submit amendments to the CBS Law to Parliament by end-December 2025 (proposed reset).
- The program is fully financed for the next 12 months.
- Executive Directors:
  - Commended reaching the HIPC completion point in December 2023.
  - Emphasized sustaining reform momentum to increase resilience, reduce poverty, and promote inclusive growth.
  - Stressed the vital role of continued donor support and capacity development.
- Selected structural benchmarks (status summary):
  - SB#1: Medium-term Revenue Roadmap for 2024-2027 published on June 29, 2024 — Met.
  - SB#2: Draft Income Tax Bill submitted to Parliament on July 9, 2024 — Implemented with delay.
  - SB#3: Non-payroll compensation fell to 0.3 percent in June (April–June average 0.8 percent) — Met.
  - SB#4: Prime Minister's decree on debt policy issued July 15, 2024 — Implemented with delay.
  - SB#5: Draft PPP bill submitted August 12, 2024 — Implemented with delay.
  - SB#6: CBS action plan to improve commercial bank data quality approved July 30, 2024 — Met.

### Monetary and financial sector policy
- Ongoing efforts to strengthen central bank institutional capacity are commendable.
- Preparatory work to reintroduce the Somali shilling and adopt a currency board arrangement is underway; gradual and carefully managed implementation strategy warranted with IMF and World Bank support.
- Complementary policies to protect currency board credibility emphasized: fiscal sustainability and central bank operational independence.
- Financial sector priorities:
  - Promote financial deepening and financial inclusion.
  - Advance AML/CFT framework reforms.
  - Further strengthen financial regulation and supervisory capacity.
- Selected monetary and financial indicators (percent/levels as in table):
  - Net Foreign Assets: -1.4, 1.6, 1.5, 1.6, 1.5, 1.6, 1.6, 1.6, 1.6, 1.5
  - Central Bank claims on non-residents: 3.1, 3.3, 2.8, 3.0, 2.6, 2.8, 2.5, 2.3, 2.0, 1.8
  - Net Domestic Assets: 15.5, 14.3, 12.7, 14.2, 12.0, 14.1, 13.9, 13.0, 12.2, 11.7
  - Credit to the private sector: 3.9, 4.9, 4.8, 5.1, 5.0, 5.3, 5.6, 5.8, 6.1, 6.4
  - Broad Money: 14.2, 15.9, 14.2, 15.8, 13.5, 15.7, 15.5, 14.5, 13.8, 13.2
  - Gross International Reserves (program definition, in millions of US$): 265.5, 265.3, 265.3, 265.3, 265.3, 265.3, 263.4, 259.6, 251.1, 230.7
  - Reserves in months of next year's imports: 0.4, 0.3, 0.3, 0.3, 0.3, 0.3, 0.3, 0.2, 0.2, 0.2
- Financial sector developments:
  - Private sector credit grew by 40 percent (y-o-y) in 2024Q2, though still below 5 percent of GDP.
  - Financial soundness indicators 2024Q2: systemwide bank capital and liquidity comfortable; NPLs at 3.4 percent.
  - Ziraat Bank operational late 2023; a second foreign bank expected to begin operations in 2025Q1.

### Inclusive growth, climate resilience, and governance
- Social and inclusion priorities:
  - Address food insecurity.
  - Build climate resilience.
  - Improve access to education and health.
  - Enhance trade integration.
- Human capital and social spending:
  - Increase human capital by improving education access and closing gender gaps.
  - Large and sustained investments in health, education, and infrastructure needed.
  - Baxnaano program: regular unconditional cash transfers to 50,000 chronically poor and vulnerable households.
- Governance and transparency:
  - Further reforms to improve governance encouraged, including enhanced transparency and accountability in the petroleum sector.
  - Directors welcomed steps to improve governance and fight corruption and called for sustained efforts.
  - Address AML/CFT deficiencies and implement petroleum sector legal framework to enhance transparency and accountability.

### Security and political context
- Despite security challenges, government remains committed to counterterrorism and transition planning from ATMIS to a new force by January 2025.
- Somalia faces significant security challenges from Al-Shabab; announced withdrawal of ATMIS by end-December 2024 is a key concern.
- Somalia engaging with the United Nations, African Union, and partners to secure support for AUSSOM starting in early 2025.
- Federalism developments:
  - High-level agreements on revenue responsibilities and resource sharing reached in 2023 and 2024 among FGS, four out of five FMS, and the Mayor of Mogadishu.
  - March 2024: Parliament ratified amendments to the first four chapters of the Provisional Constitution.

### Revenue mobilization reforms (MTRR priorities over next 3 years)
- Key MTRR actions and timelines:
  - Complete ad valorem customs reform; apply ad valorem tariffs relying on invoice values expected to begin in 2027 once SOMCAS end-to-end experience gained.
  - Harmonize customs across ports to prevent trade diversion and support EAC integration.
  - Reform consumption taxes: assessment of current 5 percent consumption tax starting in late 2025.
  - Increase revenue from large businesses leveraging sales tax electronic system.
  - Develop Integrated Tax Administration System (ITAS); ITAS in early stages.
- MTRR quantitative target: raise revenue by 0.3 percentage points of GDP every year; target to fully cover operational expenditure by 2027.

### Currency reform: reintroducing the Somalia Shilling (SOS) and currency board
- Authorities intend to reintroduce the Somalia Shilling (SOS) and adopt a currency board arrangement.
- Currency exchange project:
  - Purpose: replace old and mostly counterfeit notes; provide liquidity for small-value transactions and promote financial inclusion.
  - Implementation timeline: estimated 18-24 months once prerequisites in place (address funding gap and secure firm FGS–FMS agreement).
  - Cost: total cost estimated at US$72 million.
  - World Bank provided support but project shelved until co-financing and FMS agreement secured.
  - Old SOS in circulation estimated by World Bank: SOS 1.022-  1.546 trillion (USD 40.9 - 61.8 million).
  - Currently no deposits in shillings; about USD 1.2 billion in bank deposits and some estimates suggest a similar amount in mobile money wallets.
- Legal/institutional requirements:
  - Draft amendments to CBS Law to strengthen governance and autonomy; introduction of currency board requires significant CBS Act changes.
  - Proposed SB#9 reset: from end-March 2025 to end-December 2025 to allow time for legal amendments with IMF CD support.
- Currency board obligations and complementary policies:
  1. ensure fiscal sustainability;
  2. ensure CBS operational independence and prevent deficit financing of the government;
  3. strengthen CBS capacity, including cash management, and policies to promote transparency;
  4. secure financial stability, develop financial markets, and support capacity building of financial institutions;
  5. improve the quality, frequency, and timeliness of macroeconomic and financial data.
- CBS reserves: currently sufficient gross usable international reserves (including SDRs and gold) to cover estimated stock of old shillings to be replaced; CBS to assess income sufficiency to cover SDR use costs.
- Program augmentation: an augmentation of the ECF arrangement could be considered in a subsequent review to back the new currency.

### AML/CFT, governance, and extractives sector sequencing
- AML/CFT progress:
  - AML/CFT Act passed 2016; Targeted Financial Sanctions Law and related regulations issued 2023; List of Financial Sanctions Targets published 2024 and expanded July 2024.
  - Amendments to the AML/CFT Act submitted to Parliament in March 2024.
  - MENAFATF evaluation underway: onsite visit expected in 2025; report to be published by end-2025/early 2026.
  - Priority actions guided by MENAFATF mutual evaluation; recommend Parliamentary approval of AML/CFT amendments and accelerated rollout of National Digital ID to improve customer due diligence.
- Petroleum/extractive sector sequencing and safeguards:
  - EIFRL enacted 2023; 16 PSAs awarded since 2022 through direct negotiations.
  - Proposed SBs and deadlines:
    - SB#13: Publish EIFRL regulations by end-January 2025.
    - SB#14: Publish new regulation for Petroleum Act clarifying PSA publication standards by end-March 2025.
    - SB#15: Amend regulation harmonizing Petroleum and Procurement Acts to require IMCC review of all PSAs by end-December 2024.
    - SB#16: Continuous moratorium on signing new PSAs until legal framework completed; exception for PSAs under February 2024 defense/security agreement (to be submitted to IMCC).

### Debt, financing, and debt sustainability
- HIPC Completion Point: reached in December 2023.
- Debt sustainability assessment: Somalia assessed at moderate risk of debt distress (external and overall).
- Public debt (percent of GDP, selected): 38.2, 7.0, 6.1, 6.4, 6.6, 6.6, 8.1, 9.6, 11.1, 12.7.
- External debt (percent of GDP, selected): 37.5, 6.4, 5.6, 5.9, 6.1, 6.1, 7.6, 9.2, 10.8, 12.4.
- Projected financing indicators (selected, percent of GDP):
  - External financing requirement: 61.5 (2024), 61.3 (2025).
  - Fiscal deficit, excl. budget support grants: 1.9 (2024), 1.5 (2025).
  - Revenue and grants, excl. budget support grants: 5.9 (2024), 6.5 (2025).
  - External financing gap: 1.9 (2024), 1.0 (2025).
  - IMF ECF: 0.2 (2024), 0.2 (2025).
  - World Bank budget support grants: 1.3 (2024), 0.2 (2025).
  - World Bank concessional loans: 0.0 (2024), 0.6 (2025).
- Financing commitments (firm concessional commitments for next 12 months include):
  - World Bank: US$102.4 million.
  - EU: US$10 million.
- IMF credit outstanding projected to peak at 70.75 percent of quota in 2026 (SDR 115.6 million).
- Debt relief/creditor negotiations (as of September 21, 2024):
  - Total enhanced HIPC debt relief (PV terms): 1,903.5 (US$ million) — Total Pending: 435.1.
  - Selected creditor statuses: AFESD 99.1; AMF 155.6; IsDB 15.5 (signed July 16, 2024); OFID 19.3 (signed June 25, 2024); UAE 131.0 (negotiations advanced); Iraq 32.3 (request under consideration).

### Key macroeconomic indicators and projections (selected figures from table)
- Population: 15.6 Million, 2022 Estimate.
- Nominal GDP (millions of U.S. dollars, selected years): 10,203; 10,969; 12,804; 12,111; 13,891; 13,018; 14,197; 15,584; 16,973; 18,205.
- Real GDP (millions of U.S. dollars, selected years): 10,203; 10,633; 11,108; 11,058; 11,541; 11,501; 11,972; 12,463; 12,999; 13,584.
- Real GDP per capita in U.S. dollars: 653, 662, 673, 670, 680, 678, 687, 697, 710, 723.
- Balance of payments, current account balance (percent of GDP): -8.6, -9.3, -8.7, -8.9, -8.8, -8.7, -9.8, -10.0, -10.0, -10.0.
- Trade balance (percent of GDP): -62.9, -60.8, -58.2, -61.4, -57.2, -61.1, -58.5, -57.8, -57.6, -57.4.
- Remittances (percent of GDP): 21.0, 19.2, 18.8, 19.8, 19.8, 19.9, 20.1, 20.1, 20.1, 20.1.

### Governance, transparency, and statistics
- Progress in governance reforms: Audit Law enacted September 2023; Audit Law regulations issued June 2024; steps to restore oversight bodies and transparency measures in fiscal and financial governance.
- Statistics and data gaps:
  - New household survey published 2023 updated poverty rate, CPI weights, and GDP.
  - New national CPI to be launched January 2025.
  - Key shortcomings: few data sources, inadequate information systems, limited availability and coverage.
  - Recommendation: continue strengthening macroeconomic and financial statistics with IMF CD support and leverage non-traditional data sources.

### Policy recommendations and priorities (summarized)
- Continue fiscal reforms to strengthen domestic revenue mobilization given prospects of declining external grants and large social and development spending needs.
- Strengthen central bank institutional capacity, promote financial deepening and inclusion, and advance AML/CFT reforms.
- Implement a gradual and carefully managed reintroduction of the Somali shilling with IMF and World Bank support and complementary policies to secure credibility.
- Improve governance and transparency, particularly in the petroleum sector; refrain from signing new PSAs until legal framework completed (with limited exception for security-related PSAs subject to IMCC review).
- Prioritize investments to address food insecurity, build climate resilience, and increase access to education and health.
- Manage accession to the East African Community carefully, recognizing opportunities and risks.
- Sustain timely support from development partners, including capacity development, for successful implementation of the reform agenda.
- Maintain medium-term fiscal deficits below 3.5 percent of GDP financed with concessional loans, with at least 1.5 percent of GDP from multilateral creditors providing highly concessional financing (at least 50 percent grant element).

*Source: STAFF REPORT FOR THE 2024 ARTICLE IV CONSULTATION AND SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT (Somalia).*

### 2025. Inflation is expected to continue on a downward trend to 4.5 percent by end 2024,

### 1somea2024002-print-pdf - 2025. Inflation is expected to continue on a downward trend to 4.5 percent by end 2024,

### Macroeconomic outlook and risks
- Inflation is expected to continue on a downward trend to 4.5 percent by end 2024.
- Growth projections for 2024 and 2025 have been upgraded to 4 percent.
- Near-term risks to the outlook:
  - Climate shocks.
  - Domestic and regional security developments.
  - Lower global growth.
  - Higher commodity prices.
- Program and other risks are mitigated by continued program ownership, capacity development assistance, and sustained support from development partners.

### Program performance and Executive Board assessment
- Program performance: satisfactory; all performance criteria for this review were met.
- Structural benchmarks: six implemented (three with small delays); authorities request new target dates for two upcoming structural benchmarks:
  - Finalizing the roadmap to implement the Pay and Grade policies by end-February 2025.
  - Submitting amendments to the CBS Law to Parliament by end-December 2025.
- The program is fully financed for the next 12 months.
- Executive Directors:
  - Commended reaching the HIPC completion point in December 2023.
  - Emphasized sustaining reform momentum to increase resilience, reduce poverty, and promote inclusive growth.
  - Stressed the vital role of continued donor support and capacity development.

### Fiscal policy, revenues, and public finances
- Key fiscal guidance and priorities:
  - Raise domestic revenues to cover operational expenditure by 2027 and expand public services over time, while maintaining a prudent fiscal deficit and relying on concessional financing.
  - Strengthen domestic revenue mobilization, including customs modernization, implementation of the Income Tax Law, and stronger tax enforcement.
  - Strengthen public financial, investment, and debt management and enhance spending efficiency.
  - Conduct careful fiscal impact assessment of wage bill and pension reforms before implementation.
- Central government finances (percent of GDP, selected series):
  - Revenue and grants: 7.1, 6.8, 7.1, 7.5, 5.9, 6.8, 5.1, 4.6, 4.6, 4.7
  - Revenues: 2.6, 3.0, 2.8, 3.0, 2.1, 3.3, 3.6, 3.9, 4.2, 4.5
  - Grants: 4.5, 3.8, 4.3, 4.6, 2.8, 3.5, 1.5, 0.8, 0.5, 0.3
  - Expenditure (FGS): 7.1, 6.7, 7.5, 7.7, 7.2, 8.0, 7.1, 6.9, 6.9, 7.1
  - Compensation of employees: 2.5, 2.7, 2.8, 3.0, 2.7, 2.9, 2.8, 2.7, 2.6, 2.6
  - Purchase of non-financial assets: 0.1, 0.2, 0.3, 0.3, 0.3, 0.3, 0.4, 0.4, 0.6, 1.0
  - Overall balance: 0.0, 0.1, -0.5, -0.2, -1.3, -1.2, -2.0, -2.3, -2.3, -2.4
- Directors highlighted the need to prepare for prospects of declining external grants and the importance of continued fiscal reforms.

### Monetary and financial sector policy
- Ongoing efforts to strengthen central bank institutional capacity are commendable.
- Preparatory work to reintroduce the Somali shilling and adopt a currency board arrangement is underway; a gradual and carefully managed implementation strategy is warranted with support from the IMF and the World Bank.
- Complementary policies to protect the credibility of a currency board arrangement are emphasized: fiscal sustainability and central bank operational independence.
- Financial sector priorities:
  - Promote financial deepening and financial inclusion.
  - Advance reforms to improve the AML/CFT framework.
  - Further strengthen financial regulation and supervisory capacity.
- Selected monetary and financial indicators (percent/levels as in table):
  - Net Foreign Assets: -1.4, 1.6, 1.5, 1.6, 1.5, 1.6, 1.6, 1.6, 1.6, 1.5
  - Central Bank claims on non-residents: 3.1, 3.3, 2.8, 3.0, 2.6, 2.8, 2.5, 2.3, 2.0, 1.8
  - Net Domestic Assets: 15.5, 14.3, 12.7, 14.2, 12.0, 14.1, 13.9, 13.0, 12.2, 11.7
  - Credit to the private sector: 3.9, 4.9, 4.8, 5.1, 5.0, 5.3, 5.6, 5.8, 6.1, 6.4
  - Broad Money: 14.2, 15.9, 14.2, 15.8, 13.5, 15.7, 15.5, 14.5, 13.8, 13.2
  - Gross International Reserves (program definition, in millions of US$): 265.5, 265.3, 265.3, 265.3, 265.3, 265.3, 263.4, 259.6, 251.1, 230.7
  - Reserves in months of next year's imports: 0.4, 0.3, 0.3, 0.3, 0.3, 0.3, 0.3, 0.2, 0.2, 0.2

### Inclusive growth, climate resilience, and governance
- Promoting inclusive growth requires:
  - Addressing food insecurity.
  - Building climate resilience.
  - Improving access to education and health.
  - Enhancing trade integration.
- Social priorities:
  - Increase human capital by improving access to education and closing gender gaps in education.
  - Large and sustained investments in health, education, and infrastructure are needed to improve resilience and support inclusive growth.
- Governance and transparency:
  - Further reforms to improve governance are encouraged, including measures to enhance transparency and accountability in the petroleum sector.
  - Directors welcomed steps to improve governance and fight corruption and called for sustained efforts.
  - Address AML/CFT deficiencies and implement the legal framework for the petroleum sector to enhance transparency and accountability.

### Security and political context
- Despite security challenges, the Somali government remains steadfast in its fight against terrorism and continues to work with international partners to ensure a successful transition from the current African Union Transition Mission to a new force by January 2025.
- Somalia faces significant security challenges from Al-Shabab; announced withdrawal of ATMIS by end-December 2024 is a key concern. Somalia is engaging with the United Nations, African Union, and key partners to secure support for a new African Union Support and Stabilization Mission in Somalia (AUSSOM) starting in early 2025.

### Key macroeconomic indicators and projections (selected figures from table)
- Population: 15.6 Million, 2022 Estimate.
- Nominal GDP (millions of U.S. dollars, selected years): 10,203; 10,969; 12,804; 12,111; 13,891; 13,018; 14,197; 15,584; 16,973; 18,205
- Real GDP (millions of U.S. dollars, selected years): 10,203; 10,633; 11,108; 11,058; 11,541; 11,501; 11,972; 12,463; 12,999; 13,584
- Real GDP, annual percentage change: 2.7, 4.2, 3.7, 4.0, 3.9, 4.0, 4.1, 4.1, 4.3, 4.5
- Real GDP per capita in U.S. dollars: 653, 662, 673, 670, 680, 678, 687, 697, 710, 723
- CPI (period average, percent change): 6.8, 6.2, 4.8, 5.3, 3.9, 4.2, 3.6, 3.4, 3.2, 3.0
- CPI (e.o.p., percent change): 6.1, 6.6, 4.3, 4.5, 3.7, 3.9, 3.5, 3.3, 3.1, 2.6
- Public debt (percent of GDP): 38.2, 7.0, 6.1, 6.4, 6.6, 6.6, 8.1, 9.6, 11.1, 12.7
- Balance of payments, current account balance (percent of GDP): -8.6, -9.3, -8.7, -8.9, -8.8, -8.7, -9.8, -10.0, -10.0, -10.0
- Trade balance (percent of GDP): -62.9, -60.8, -58.2, -61.4, -57.2, -61.1, -58.5, -57.8, -57.6, -57.4
- Exports of goods and services (percent of GDP): 17.7, 19.7, 18.9, 20.5, 20.1, 21.1, 21.8, 22.5, 22.8, 23.1
- Imports of goods and services (percent of GDP): 80.6, 80.6, 77.1, 81.8, 77.2, 82.2, 80.3, 80.3, 80.5, 80.4
- Remittances (percent of GDP): 21.0, 19.2, 18.8, 19.8, 19.8, 19.9, 20.1, 20.1, 20.1, 20.1
- Grants (percent of GDP): 33.7, 32.7, 31.0, 32.9, 29.8, 32.8, 29.0, 28.1, 27.8, 27.6
- Foreign Direct Investment (percent of GDP): 5.2, 5.2, 5.4, 5.7, 5.4, 5.4, 5.4, 5.4, 5.4, 5.4
- External debt (percent of GDP): 37.5, 6.4, 5.6, 5.9, 6.1, 6.1, 7.6, 9.2, 10.8, 12.4

### Policy recommendations and priorities (summarized)
- Continue fiscal reforms to strengthen domestic revenue mobilization given prospects of declining external grants and large social and development spending needs.
- Continue efforts to strengthen central bank institutional capacity, promote financial deepening and inclusion, and advance AML/CFT reforms.
- Implement a gradual and carefully managed reintroduction of the Somali shilling with IMF and World Bank support and complementary policies to secure credibility.
- Improve governance and transparency, particularly in the petroleum sector.
- Prioritize investments to address food insecurity, build climate resilience, and increase access to education and health.
- Manage accession to the East African Community carefully, recognizing opportunities and risks.
- Sustain timely support from development partners, including capacity development, for successful implementation of the reform agenda.

*Source: STAFF REPORT FOR THE 2024 ARTICLE IV CONSULTATION AND SECOND REVIEW UNDER THE EXTENDED CREDIT FACILITY ARRANGEMENT (Somalia).*

### 5. The FGS and FMS continue to advance the federalism agenda, though

### 5. The FGS and FMS continue to advance the federalism agenda, though

### Political and federalism developments
- High-level agreements on principles for revenue responsibilities and resource sharing were reached in 2023 and 2024 among leaders of the FGS, four out of five FMS, and the Mayor of Mogadishu.
- March 2024: Parliament ratified amendments to the first four chapters of the Provisional Constitution—including changes to allow the president to directly appoint and remove the prime minister—though with opposition from various political stakeholders.
- Persistent challenge: lack of political consensus among the FGS and all FMS impacts implementation of federal fiscal reforms (as noted in Somalia’s 2022 Country Engagement Strategy).

### Regional integration and security pacts
- March 2024: Somalia joined the East African Community (EAC) and developed a multiyear roadmap for adoption of the customs union and common market.
- Tensions with Ethiopia remain elevated following the January 2024 Memorandum of Understanding (MoU) between Ethiopia and Somaliland, seen by Somalia as a threat to sovereignty and territorial integrity.
- February 2024: Somalia signed a 10-year maritime defense pact with Türkiye to protect Somali marine resources and counter piracy and terrorism threats.
- August 2024: Somalia signed a joint security pact with Egypt to enhance counter-terrorism operations.
- Context note: Somaliland declared independence from Somalia in 1991 but has not been recognized by the international community.

### Recent economic developments (2024)
- Agriculture and livestock:
  - Livestock exports and agriculture production rebounded as rains resumed, supporting growth in 2024.
  - Economic activity during 2024H1 remained solid due to strong agriculture production and exports and improvement in remittances.
- Inflation and prices:
  - Inflation at 5.3 percent in September 2024 compared to 6.6 percent in December 2023.
  - Food and fuel prices have been moderating, but inflation remains sticky.
- Revenues and fiscal operations:
  - Domestic revenues reached US$268 million by end-September 2024, above the program floor.
  - Drivers: durable improvements in collections at customs thanks to the Somalia Customs Automated System (SOMCAS) and improvements in tax administration.
  - August 2024: a new sales tax electronic system implemented that collects sales tax directly from consumers paying into merchant mobile money/mobile wallet accounts.
  - September 2024: new regulation establishing civil penalties for violation of revenue laws issued.
  - Disbursements of budget support grants have been higher than expected, including from the World Bank, EU, Türkiye, and the United Arab Emirates.
- Financial sector:
  - Private sector credit grew by 40 percent (y-o-y) in 2024Q2, though it is still below 5 percent of GDP.
  - Financial soundness indicators for 2024Q2 reported by the Central Bank of Somalia (CBS): systemwide bank capital and liquidity at comfortable levels, and NPLs at 3.4 percent.
  - Ziraat Bank became operational in late 2023; a second foreign bank is expected to begin operations in 2025Q1.

### Program performance and structural benchmarks
- All quantitative performance criteria (QPCs) and indicative targets (ITs) for end-June 2024 were met. ITs for end-September 2024 were also met.
- Six structural benchmarks due for the 2nd review: three met, three implemented with delay (additional time needed to incorporate technical recommendations).
  - SB#1: Medium-term Revenue Roadmap for 2024-2027 published on June 29, 2024 (met).
  - SB#2: Draft Income Tax Bill submitted to Parliament on July 9, 2024 (implemented with delay, was due end-June 2024).
  - SB#3: Non-payroll compensation of employees as a share of total compensation fell to 0.3 percent in the month of June, average for April-June 2024 at 0.8 percent (met).
  - SB#4: Prime Minister issued a decree and regulations on debt policy on July 15, 2024 (implemented with delay, was due end-June 2024).
  - SB#5: Draft PPP bill submitted to Parliament on August 12, 2024 (implemented with delay, was due end-June 2024).
  - SB#6: CBS Board approved an action plan to improve commercial bank data quality on July 30, 2024 (met).

### Outlook and macroeconomic projections
- Real GDP growth projections:
  - 2024: upgraded to 4.0 percent.
  - 2025: 4.0 percent.
  - Medium term: growth expected to accelerate to 4.5 percent as structural reforms pay off and access to financing improves after HIPC CP.
- Current account and inflation:
  - Current account deficit forecast at 8.9 percent of GDP in 2024.
  - Inflation expected to decline to 4.5 percent at end-2024.
- Drivers and assumptions:
  - Agriculture recovery from the 2021-22 drought, livestock export gains, and strong remittances.
  - Baseline projections do not incorporate the impact of Somalia joining the EAC.
- Risks:
  - Near-term risks tilted to the downside: climate risks, lower global growth, higher commodity prices, deterioration of global security, the ATMIS transition, and political risks linked to federalism.
  - Medium-term upside risks: benefits from EAC integration, potential oil discoveries, development of the blue economy, and advances in federalism.
- Financing and buffers:
  - Existing cash buffers, expenditure rationalization, and current financing commitments help mitigate some risks, but significant adverse scenarios would require additional international support.

### Authorities’ views
- Authorities concur with staff’s assessment of outlook and risks and maintain a positive economic outlook based on recovery in agricultural production and livestock exports, robust construction sector growth, and sustained remittances.
- Expectations: continued growth in FDI and credit to the private sector supporting domestic demand; recognition that risks are tilted to the downside (regional geopolitical uncertainties, ATMIS transition, climate shocks, and possible slowdown in global growth).
- Medium-term anticipation: strong growth as structural reforms support confidence and investment and development of the blue economy and petroleum sectors, balanced against reliance on agriculture and remittances.

### Fiscal policy, public finances, and reform priorities
- Revenue and grants:
  - Domestic revenues increased from 1 percent to 3 percent of GDP between 2013 and 2023.
  - Total external grants finance close to 60 percent of the budget; the World Bank provided 88 percent of total grants in 2023.
  - Since HIPC CP in December 2023, Somalia assessed at moderate risk of debt distress; under conventional IDA20 terms Somalia would have been expected to no longer have access to new grants but only new concessional loans starting in July 2024.
  - February 2024: World Bank Executive Board approved extension of Somalia grant financing under IDA20 until end-June 2025; Somalia requested a further extension under IDA21 with a final decision expected in December 2024.
  - Expected decline in grants increases urgency to raise domestic revenues.
- Expenditure and PFM:
  - Total expenditure as a share of GDP is only a quarter of the SSA average; compensation of employees is less than half the SSA average.
  - On-budget social spending has been increasing but remains a fraction of SSA peers; capital expenditure is minimal compared to SSA.
  - PFM improvements: legal framework, Somalia Financial Management Information System (SFMIS), electronic payments, automatic bank account reconciliation, annual audited FGS financial statements, full integration of compensation into single payroll, Invoice Tracking System, new decree and regulations on debt policy.
  - Further work needed to strengthen accountability and efficiency of spending and expenditure capacity.
- Pay, grade, and pension reforms:
  - Public service pay and grade policy approved in 2022; new pension scheme for civil servants enacted in April 2024.
  - Pension scheme: pay-as-you-go, defined benefit; contribution rate 10 percent (5 percent by FGS civil servants and 5 percent by the government).
  - Projected scheme cash flows expected to turn negative about 15 years from commencement, implying the contribution rate will need to be increased then.
  - Implementation requires a fiscal impact assessment, dependent registry, and updated financial projections.
- 2024 fiscal outturn and 2025 budget:
  - US$125 million World Bank disbursement received (compared to US$75 million expected in the 1st review).
  - Overall fiscal deficit for 2024 expected at 0.2 percent of GDP (compared to 0.5 percent of GDP in the 1st review).
  - 2025 baseline: overall fiscal deficit of 1.2 percent of GDP (assuming World Bank budget support provided as concessional loans), with domestic revenues rising to 3.3 percent of GDP.
  - Authorities plan measures of about 0.3 percentage points of GDP for 2025 in line with the Medium-Term Revenue Roadmap, including customs revenue increases, improved enforcement of sales and income taxes, and raising overflight fees.
  - Objective: fully cover operational expenditure with domestic revenues by 2027; development expenditure expected to increase financed by project grants.
- Ongoing and proposed reforms and benchmarks:
  - Income Tax Law expected to be enacted by mid-2025; regulations to follow with Fund CD support.
  - By end-June 2025: ensure sustained end-to-end use of SOMCAS in Mogadishu seaport and airport by fully discontinuing PCMIS (proposed SB#10).
  - Work on a non-tax portal to facilitate payment for government services across MDAs and reduce collection leakages.
  - Progress to update PFM regulations relating to digital signatures and implement digital signatures in SFMIS (SB#8, due end-June 2025).
  - By end-April 2025: publish an Annual Debt Management Report (ADMR) for FY2024 in line with IMF TA recommendations (proposed SB#11).
  - IMF CD support to develop a roadmap to implement Pay and Grade policies in October/November; SB#7 due end-December 2024 proposed reset date end-February 2025.

### Policy recommendations and financing principles
- Continue efforts to raise domestic revenue (MTRR commitment to raise revenue by 0.3 percentage points of GDP every year).
- Maintain focus on PFM reforms to improve expenditure capacity and accountability, including digital signatures, SFMIS enhancements, Invoice Tracking System usage, and commercial bank data quality improvements.
- Implement Income Tax Law and customs modernization (SOMCAS end-to-end use) to reduce collection leakages.
- Conduct fiscal impact assessment and create dependent registry before implementing the new pension scheme and finalizing pay and grade reform to ensure manageability of fiscal costs.
- Maintain medium-term fiscal deficits below 3.5 percent of GDP financed with concessional loans, with at least 1.5 percent of GDP coming from multilateral creditors providing highly concessional financing terms (at least 50 percent grant element).
- Continue to seek budget support grants until operational expenditure can be fully covered by domestic revenues by 2027.

*Source: IMF staff report chapter on recent developments and program discussions.*

### 26. Achieving the authorities’ ambitious revenue objectives will require concerted

### 26. Achieving the authorities’ ambitious revenue objectives will require concerted

### Revenue mobilization reforms (MTRR priorities over next 3 years)
- Complete the ad valorem customs reform: once stakeholders have sufficient experience with the full end-to-end use of the SOMCAS system, the application of ad valorem tariffs that rely on invoice values is expected to begin in 2027.
- Harmonization across all ports to prevent trade diversion; further customs modernization and harmonization will support progress towards EAC integration.
- Reform consumption taxes: authorities intend to carry out an assessment of the current 5 percent consumption tax, starting in late 2025, to guide modernization efforts; reform will be informed by EAC discussions.
- Increase revenue mobilization from large businesses: leverage expansion in tax registrations associated with the sales tax electronic system to raise collections from high-potential sectors.
- Improve revenue administration: develop the Integrated Tax Administration System (ITAS) to improve efficiency and governance; ITAS is in early stages.

### Public financial management (PFM) and expenditure controls
- Roadmap implementation to expand invoice tracking to all payments for goods and services is progressing as planned.
- IMF CD-supported capacity building in public investment management, particularly project appraisal and selection, to facilitate gradual increase in public investment.
- PPP bill submitted to Parliament will be edited before enactment to:
  - ensure consistency between the PPP process and the budget process;
  - update affordability and project selection criteria;
  - ensure PPPs are assessed alongside other investment projects during strategic allocation in budget preparation—in line with IMF staff recommendations.
- Further efforts needed by FMS and Banadir to publish audited annual financial reports timely.

### Fiscal federalism and harmonization
- FGS seeking broad consensus with all FMS on the fiscal federalism framework; discussions ongoing in Parliament (constitutional amendments) and the inter-government Ministerial forum (revenue responsibilities and resource sharing).
- IMF readiness to support development and implementation of revenue sharing and expenditure frameworks once political agreement is achieved.

### Authorities’ fiscal views and commitments
- Continued commitment to fiscal sustainability and the fiscal anchor agreed under the program.
- Emphasis on need to gradually make space in budgets for development expenditure by raising domestic revenues, maintaining operational expenditure in check, and continued external support.
- Grant financing remains critical; authorities underscored importance of a further extension of grant financing beyond June 2025 under World Bank IDA21.
- Target to raise domestic revenue to fully cover operational expenditure by 2027, guided by the MTRR.
- Implementation of pay and grade and pensions reforms will be carefully assessed to ensure fiscal costs are manageable.
- Commitment to maintain momentum on PFM reforms, strengthen public investment management capacity (including PPPs), and enhance public debt management framework.
- In the Constitutional review process, seek to strengthen links between Constitution’s fiscal provisions and primary legislation and policy agreements established over the past decade.

### Key fiscal statistics and public finance projections (from Text Table 2)
- Revenue excluding projects (Millions of USD): 434 471 531 515 560 600 438 461
- Domestic revenue (Millions of USD): 263 329 346 357 358 430 423 423
- Tax (Millions of USD): 182 225 241 254 254 295 298 295
- Non-tax (Millions of USD): 81 104 105 103 104 135 125 128
- Budget support grant (Millions of USD): 17 14 11 18 5 15 8 15 8? (table layout ambiguous in source)
- Expenditure excluding projects (Millions of USD): 432 465 570 575 584 628 610 619
- Operational expenditure (Millions of USD): 346 389 482 485 485 514 505 505
- Compensation of employee (Millions of USD): 252 291 357 357 357 366 371 366
- Goods and services (Millions of USD): 93 93 1? 161 161 161 351 201 28? (table layout ambiguous in source)
- Interest (Millions of USD): 15 10 13 12 14 14 12
- Overall balance excluding projects (Millions of USD): 26 -38 -60 -24 -28 -172 -158
- Project grants (Millions of USD): 287.8 27 05 1038 935 173 237 6424 (source table layout fragmented)
- Total revenues including projects (Millions of USD): 721.9 74 110 4190 49111 3328 14884 (source table layout fragmented)
- Total expenditure including projects (Millions of USD): 719.5 736 10799649 3613609961043 (source table layout fragmented)
- Overall balance including projects (Millions of USD): 2.46 -38 -60 -24 -28 -182 -158
- Revenue excluding projects (Percent of GDP): 4.3 4.3 4.4 4.0 4.6 4.6 3.2 3.5
- Domestic revenue (Percent of GDP): 2.6 3.0 2.9 2.8 3.0 3.3 3.0 3.3
- Tax (Percent of GDP): 1.8 2.0 2.0 2.0 2.1 2.3 2.1 2.3
- Non-tax (Percent of GDP): 0.8 1.0 0.9 0.8 0.9 1.0 0.9 1.0
- Budget support grant (Percent of GDP): 1.7 1.3 1.5 1.2 1.7 1.3 0.1 0.3
- Expenditure excluding projects (Percent of GDP): 4.2 4.2 4.7 4.5 4.8 4.8 4.4 4.8
- Operational expenditure (Percent of GDP): 3.4 3.5 4.0 3.8 4.0 3.9 3.6 3.9
- Compensation of employee (Percent of GDP): 2.5 2.7 2.9 2.8 2.9 2.8 2.7 2.8
- Goods and services (Percent of GDP): 0.9 0.8 1.0 0.9 1.0 1.0 0.9 1.0
- Interest (Percent of GDP): 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1
- Overall balance excluding projects (Percent of GDP): 0.0 0.1 -0.3 -0.5 -0.2 -0.2 -1.2 -1.2
- Project grants (Percent of GDP): 2.8 2.5 4.2 3.0 2.9 5.6 2.7 3.3
- Total revenues including projects (Percent of GDP): 7.1 6.8 8.6 7.1 7.5 10.2 5.9 6.8
- Total expenditure including projects (Percent of GDP): 7.1 6.7 8.9 7.5 7.7 10.4 7.2 8.0
- Overall balance including projects (Percent of GDP): 0.0 0.1 -0.3 -0.5 -0.2 -0.2 -1.3 -1.2
- Note: Source: IMF Staff estimates. 1/ Social benefits (Baxnaano program) were sharply increased in 2022-2024 in project budgets to help address multiple shocks which are expected to gradually subside over the medium term.

### Monetary and financial policy: context and institutional developments
- Somalia is a de-facto dollarized economy; CBS has not issued currency since 1991.
- Private sector credit at end-2023: 4.9 percent of GDP.
- Constraints: high informality, lack of financial infrastructure, high risks, fragile correspondent banking relations due to money laundering/financing of terrorism concerns.
- Licensing and supervision: today all banks and money transfer businesses are subject to licensing and inspections; licensing/regulation of mobile money operators launched in 2021; five MMOs currently licensed.
- Supervisory data quality is a serious concern; capacity of supervisors needs strengthening.

### AML/CFT progress and evaluation
- AML/CFT Act passed in 2016; Financial Reporting Center strengthening suspicious transaction analysis capacity.
- Targeted Financial Sanctions Law and related regulations issued in 2023; Somalia published the List of Financial Sanctions Targets in 2024.
- Challenges: lack of a widespread national ID and similar names complicate implementation.
- Amendments to the AML/CFT Act, drafted with IMF technical assistance, were submitted to Parliament in March 2024.
- MENAFATF evaluation underway: onsite visit expected in 2025; resulting report to be published by end-2025/early 2026.
- Priority actions should be guided by the MENAFATF mutual evaluation; Parliamentary approval of AML/CFT amendments and accelerated rollout of National Digital ID recommended to improve customer due diligence.

### Currency reform: reintroducing the Somalia Shilling (SOS) and currency board
- Authorities intend to reintroduce the Somalia Shilling (SOS) and adopt a currency board arrangement.
- Currency exchange project will reintroduce the SOS as legal tender by replacing old and mostly counterfeit notes in circulation.
- Purpose: provide liquidity for small-value transactions and promote financial inclusion for vulnerable populations without access to USD or mobile money.
- Even after reintroduction, economy expected to remain highly dollarized for some time.
- Implementation timeline: estimated 18-24 months once prerequisites are in place, including addressing the funding gap and securing firm agreement between the FGS and all FMS.
- Cost: total cost of the currency exchange project is estimated at US$72 million.
- World Bank has provided support but the project was shelved until co-financing and FMS agreement secured.
- Old SOS in circulation estimated by the World Bank to range between SOS 1.022-  1.546 trillion (USD 40.9 - 61.8 million).
- Currently no deposits in shillings; contrast: about USD 1.2 billion in bank deposits and some estimates suggest a similar amount held in mobile money wallets.
- Legal and institutional requirements: draft amendments to the CBS Law to strengthen governance and autonomy; introduction of a currency board requires significant changes to the CBS Act.
- Proposed modification/reset of structural benchmark (SB#9): from end-March 2025 to end-December 2025 to allow time for legal amendments with IMF CD support.
- Currency board obligations: CBS will need to maintain foreign reserves to fully cover its monetary liabilities after introduction; complementary policies needed to protect credibility, including:
  1. ensure fiscal sustainability;
  2. ensure CBS operational independence and prevent deficit financing of the government;
  3. strengthen CBS capacity, including cash management, and policies to promote transparency;
  4. secure financial stability, develop financial markets, and support capacity building of financial institutions;
  5. improve the quality, frequency, and timeliness of macroeconomic and financial data.
- CBS currently has sufficient gross usable international reserves (including SDRs and gold) to cover the estimated stock of old shillings to be replaced; CBS would need to assess whether its income would be sufficient to cover costs associated with the use of SDR holdings.
- An augmentation of the ECF arrangement could be considered in a subsequent program review to back the new currency and enhance credibility once timing is clearer.

### Program discussions, CBS governance, and supervisory priorities
- CBS strengthening governance and legal frameworks, including implementing IMF Safeguards recommendations; steps to finalize remaining recommendations underway (cyber security, business continuity, CBS Law).
- In October 2024, CBS joined the World Bank’s Reserve Advisory and Management Partnership to strengthen reserve management capacity.
- Regulatory monitoring: CBS monitoring compliance with capital adequacy (CAR) and liquidity coverage ratios (LCR) effective since January 2024; engaging with banks below regulatory minimum on CAR.
- Action plan: by end-July 2025 CBS will issue detailed written instructions to banks on data calculations pertaining to CAR and LCR (proposed SB#12).
- Priority AML/CFT actions should be guided by MENAFATF mutual evaluation; enactment of AML/CFT amendments and rollout of National Digital ID highlighted.

### Financial deepening, payments system, and infrastructure
- Reforms with IMF CD support to promote financial deepening and inclusion while maintaining stability: enhance legislative and oversight frameworks; improve regulatory data quality; augment CBS technical capacity.
- Enactment of key legislation to improve regulatory/supervisory framework: Financial Institutions Law, National Payment Systems Law, Insurance Law.
- National payments system work: developing a National QR code and National SWITCH.
- Financial infrastructure pipeline: establishment of a credit bureau and central collateral registration.

### Authorities’ monetary and reform views
- Authorities committed to strengthening institutional capacity, developing national payments system, modernizing regulatory and legal frameworks, and developing financial infrastructure to improve intermediation.
- Commit to advancing AML/CFT operational and legal reforms to comply with international standards, support correspondent banking relationships, and support remittance flows.
- Reintroduction of SOS as legal tender seen as national priority to restore currency credibility, promote financial inclusion, and facilitate small-value payments.
- Authorities view currency reform and a currency board arrangement as a way to provide stable and predictable policy environment while maintaining a dual currency regime with the U.S. dollar.

### Climate shocks, inclusive growth, and governance
- Climate shocks significantly exacerbate vulnerabilities, including food insecurity.
- According to the 2024 World Bank Somalia Economic Update, over two-thirds of Somali households reported experiencing at least one climate-related natural disaster during 2021-2022.
- Climate shocks compound agriculture sector challenges: weak security and institutions, inadequate investment and standards, and poor infrastructure.
- Country lacks capacity to mitigate shocks due to inadequate financial resources, infrastructure, and social safety net; each new climate shock is a setback for growth and poverty reduction.

*Source: IMF staff summary of chapter 26 (selected extracts).*

### 43. Somalia continues to face

### 43. Somalia continues to face

### Human development and social indicators
- 54 percent of the population lived below US$2 per day in 2022 (2023 Somalia Poverty Report).
- Around 28 percent of children under five years experienced stunting (2023 NDP9 Annual Progress Report).
- Only 39 percent of children enrolled in primary school in 2022.
- An estimated 66   percent of the population lacking formal education.
- The healthcare system’s capacity, infrastructure, and resources remain insufficient, particularly during natural disasters and health emergencies.

### Petroleum and extractive sector prospects and risks
- Somalia has potentially sizeable oil and gas reserves, though unproven.
- Key legal elements in place: 2020 Petroleum Act and 2023 Extractive Industries Fiscal Regime Law (EIFRL).
- Since 2022, the FGS awarded 16 production sharing agreements (PSAs) to four different contractors through direct negotiations.
- Oversight by the Inter-Ministerial Concessions Committee (IMCC) in the most recent PSAs is a positive step, but transparency and accountability around negotiation and signature of PSAs have been limited.

### Legal, regulatory, and sequencing commitments for petroleum licensing
- By end January 2025, authorities will publish the EIFRL regulations, in line with IMF recommendations (proposed SB #13).
- By end-March 2025, authorities will publish a new regulation for the Petroleum Act clarifying publication standards for all PSAs (including timeframe and coverage), in line with IMF recommendations (proposed SB #14).
- By end-December 2024, authorities will amend the regulation harmonizing the Petroleum and Procurement Acts to require submission of all PSAs to IMCC for review and approval (proposed SB#15).
- Authorities will finalize the regulations for the Petroleum Act.
- Authorities commit to not signing any new PSAs until the legal framework is completed—with the exception of PSAs negotiated under the existing specific defense and security framework agreement approved by Parliament in February 2024, which would be submitted to IMCC for review and approval (proposed continuous SB #16).

### Governance, anti-corruption, and institutional reforms
- Somalia is a fragile state with significant capacity constraints contributing to weak governance and corruption risks.
- The National Anti-Corruption Strategy acknowledges the ubiquity of corruption and its threat to security, justice, and development.
- Recent reforms (Annex III) have somewhat improved governance practices and transparency across fiscal and financial sector governance, anti-corruption, market regulation, and AML/CFT.
- Somalia accessed the UN Convention Against Corruption (UNCAC) and ratified the African Union and Arab conventions.
- The 2023 Audit Law establishes groundwork for a robust federal audit system; related regulations were issued in June 2024.
- In February 2024, authorities submitted the United Nations Convention Against Transnational Organized Crime (UNTOC) and its protocols for ratification.
- Further efforts needed: review existing laws for UNCAC compliance, strengthen resources of the Independent Anti-Corruption Commission (IACC), and sustain reforms under the ECF arrangement in revenue, PFM, fiscal transparency, financial governance, AML/CFT, and procurement and concessions.

### Social protection, service delivery, and human capital initiatives
- Baxnaano social protection program (with World Bank support) provided regular unconditional cash transfers to 50,000 chronically poor and vulnerable households.
- Cash assistance was also provided to pregnant and lactating mothers, youth, the elderly, and people with disabilities.
- Support provided to 44,200 households affected by conflict and climate-related shocks.
- In November 2023, a Unified Social Registry was launched to enhance monitoring of poor and vulnerable populations.
- Notable 2023 achievements: establishment of two key healthcare facilities and hiring of 3,000 teachers for public schools.
- Centennial Vision 2060 and National Transformation Plan (NTP) 2025-2029 are under preparation to succeed NDP9 in January 2025.

### Regional integration and trade (EAC and WTO)
- EAC accession presents opportunities (state-building reforms, customs modernization, strengthened trade) and risks (customs revenue losses, widening trade imbalances, security risks from freedom of movement).
- Recommendation: follow a gradual approach to integration, maintain macroeconomic stability, implement reforms to strengthen human capital and productivity, and sequence EAC accession with WTO accession to exploit synergies.

### Statistics, data gaps, and capacity development
- A new household survey published in 2023 updated the poverty rate, CPI weights, and GDP.
- A new national CPI to be launched in January 2025.
- Key shortcomings: few data sources, inadequate information systems, limited availability and coverage (Annex IV).
- Recommendation: continue to strengthen compilation and dissemination of macroeconomic and financial statistics with IMF CD support; leverage non-traditional data sources (satellite imagery and sensor data) to enhance coverage, quality, and timeliness.
- Authorities committed to launching new surveys and improving quality and timeliness of macroeconomic statistics.

### Financing, program modalities, and debt outlook
- Performance criteria and structural benchmarks agreed for the next 12 months; new performance criteria proposed for June and September 2025.
- Seven new structural benchmarks proposed for the next 12 months; two requested target date shifts:
  - Finalize roadmap to implement Pay and Grade policies by end-February 2025.
  - Submit amendments to the CBS Law to Parliament by end-December 2025.
- Debt sustainability assessment (DSA) remains broadly unchanged from the 1st program review; staff assesses Somalia’s external and overall public debt to be sustainable in the medium-term.
- The debt service to revenue indicative threshold is breached under the stress scenario in the outer years of the 10-year assessment horizon, consistent with a moderate risk rating.
- Authorities continuing negotiations to finalize debt relief agreements with remaining creditors that have any HIPC eligible debt.
- Program is fully financed for the next 12 months with firm concessional financing commitments, including:
  - World Bank: US$102.4 million
  - EU: US$10 million
- IMF credit outstanding is projected to peak at 70.75   percent of quota in 2026 (SDR 115.6 million), below the applicable normal cumulative access limit.
- To mitigate debt servicing risks, program includes reforms to increase revenues and ceilings on overall deficits and non-concessional borrowing.

### Projected financing indicators (selected figures from text table)
- External financing requirement: 61.5 (2024), 61.3 (2025) (Percent of GDP)
- Fiscal deficit, excl. budget support grants: 1.9 (2024), 1.5 (2025)
- Revenue and grants, excl. budget support grants: 5.9 (2024), 6.5 (2025)
- Trade balance: 61.4 (2024), 61.1 (2025)
- Expenditure: 7.7 (2024), 8.0 (2025)
- Amortization & interest: 0.2 (2024), 0.2 (2025)
- Available financing: 59.7 (2024), 60.3 (2025)
- Foreign Direct Investment: 5.7 (2024), 5.4 (2025)
- External financing gap: 1.9 (2024), 1.0 (2025)
- Fiscal financing gap: 1.9 (2024), 1.0 (2025)
- Financing commitments so far: 1.9 (2024), 1.0 (2025)
- IMF ECF: 0.2 (2024), 0.2 (2025)
- World Bank budget support grants: 1.3 (2024), 0.2 (2025)
- World Bank concessional loans: 0.0 (2024), 0.6 (2025)
- Other: 0.4 (2024), 0.1 (2025)

### Capacity development support and the Somalia Country Fund (SCF)
- Somalia will continue to need extensive CD support financed by the SCF.
- The SCF currently has sufficient funding until April 2026 but additional financing will be essential for CD activities beyond this date.
- SCF has enabled an average of 20 IMF missions per year and sustained, sequenced CD across tax policy and revenue administration, public financial management, debt management, financial regulation and supervision, central bank institutional framework, AML/CFT, and macroeconomic and financial statistics.
- Current SCF financial supporters include Canada, the European Union, Italy, Saudi Arabia, Sweden, and the United Kingdom; additional funding is necessary to improve SCF financial sustainability.

### Staff appraisal
- Somalia has maintained a strong track record of reform implementation.
- Authorities remain committed to program objectives and engagement with the Fund and international partners.
- Program performance has been strong, with all performance criteria met and significant progress on structural reforms.

*Source: 1somea2024002-print-pdf - 43. Somalia continues to face (IMF).*

### 62. The 2025 budget is aligned with the objectives of the ECF arrangement, while

### 62. The 2025 budget is aligned with the objectives of the ECF arrangement, while

### Fiscal framework and role of grants
- The 2025 budget is aligned with the objectives of the ECF arrangement, while continued access to grant financing remains critical.
- The level of domestic revenues for 2025 is ambitious and realistic, anchored in the objectives and policies outlined in the MTRR.
- The budget accommodates higher spending on education and health, while moving towards the objective of fully covering operational expenditure with domestic revenues by 2027.
- Until the latter objective is met, Somalia would be best served with continued access to budget support grants.
- Access to grant financing also remains critical to support development expenditure.
- Over the medium-term, the authorities remain committed to a prudent fiscal framework that balances the need for higher development expenditure with protecting fiscal sustainability, while taking into account capacity constraints.

### Revenue mobilization and tax administration
- Sustained revenue mobilization efforts are needed to fully cover operational expenditure and make room for development spending over time.
- Domestic revenues remain insufficient to cover operational expenditure.
- There is heavy reliance on external grants that are expected to decline over time.
- Continued progress is needed on:
  - customs modernization,
  - implementation of the Income Tax Law,
  - stronger enforcement of sales and income taxes,
  - enhancement of revenue administration.
- These measures are outlined in the MTRR and intended to strengthen revenues and improve transparency.

### Public financial management and debt management capacity
- The authorities should continue to strengthen public financial management and debt management capacity.
- Key reforms include:
  - implementing digital signatures,
  - outlining the steps to implement the Pay and Grade policies.
- Somalia needs to build public investment management capacity (in particular in project appraisal and selection) and develop the PPP framework to ensure implementation of quality and affordable projects while safeguarding fiscal sustainability.
- Implementation of the pay and grade reform and new pension scheme for civil servants requires careful consideration to ensure fiscal costs are manageable.
- The application of the new pension law needs to be preceded by a fiscal impact assessment and a realistic implementation plan.
- The authorities also need to continue to strengthen the public debt management framework and capacity.

### Financial deepening, inclusion, and central bank reforms
- It is important to continue advancing reforms to promote financial deepening and financial inclusion.
- The CBS should further strengthen financial regulation and supervision capacity, including through measures to improve the quality of data submitted by commercial banks.
- The CBS is encouraged to continue implementing the remaining recommendations of the 2024 Safeguards Assessment in areas related to cyber security and business continuity.
- To enhance CBS autonomy and governance, the authorities should move forward with the planned amendments to the CBS Law, while also incorporating currency board related amendments.
- Achieving timely enactment of key financial sector bills and the AML/CFT Bill is important.
- Continued efforts are needed to address ML/FT risks and future reforms should be informed by the findings of the MENAFATF Mutual Evaluation.

### Currency exchange project and currency board preparatory work
- The launch of preparatory work on the currency exchange and the currency board arrangement is welcome.
- The authorities are highly encouraged to secure co-financing and an agreement with all FMS on the currency exchange project.
- They are encouraged to continue preparatory work on a currency board arrangement, with IMF CD assistance, which the authorities view as a good fit for Somalia, providing the country with a credible and predictable policy framework.
- Somalia will also need to maintain complementary policies to sustain the credibility of the currency board once implemented, including fiscal sustainability and central bank independence, among others.

### Petroleum sector legal framework
- Implementation of a strong legal framework for the petroleum sector will ensure that the sector is developed sustainably, fairly, and transparently.
- The authorities should continue building capacity and ensure completion and implementation of the legal framework, including the necessary regulations to enhance transparency and accountability.
- Staff further recommended to refrain from issuing any new production sharing agreements until the legal framework is completed.

### Governance, anti-corruption, and oversight
- Further reforms are needed to improve governance and fight corruption.
- This includes strengthening the capacity of the Auditor General’s Office, further progress on implementation of the UNCAC, and staffing of the IACC.

### Resilience, human capital, and development partner support
- Sustained efforts are crucial to increase resilience, reduce poverty, and promote inclusive growth, with the support of international partners.
- Greater human capital is needed to boost growth, including by improving access to education for Somali children and closing gender gaps in education.
- Building resilience to climate shocks and strengthening food security requires large investments in disaster risk management, human capital, infrastructure, and the agriculture sector.
- Given Somalia’s severe resource constraints, sustained support from development partners remains critical.
- The EAC accession presents opportunities, challenges, and risks; the integration process needs to be managed carefully.
- To mitigate risks, Somalia should follow a gradual approach to EAC integration, maintain macroeconomic stability, and implement reforms to strengthen human capital and increase productivity.

### Downside risks and program mitigation
- Despite the progress, downside risks remain significant.
- Somalia faces important risks emanating from regional geopolitical developments and climate shocks, as well as lower global growth and higher commodity prices.
- Risks to the program are mitigated by continued program ownership, CD support, and sustained support from development partners.

### Program review, disbursement, and structural benchmarks
- Staff supports the completion of the second review and disbursement of SDR 7.5 million under the ECF arrangement.
- The authorities plan to use the disbursement for direct budget support, as indicated at the time of the approval of the ECF arrangement.
- In view of capacity constraints and progress to date, staff also supports the authorities’ request for new target dates for two structural benchmarks.
- The attached Letter of Intent and the Memorandum of Economic and Financial Policies set out the appropriate policies that meet the program objectives.

*Source: Excerpt from the provided IMF content.*

### 72. It is recommended that the next Article IV consultation with Somalia be held on a

### 1somea2024002-print-pdf - 72. It is recommended that the next Article IV consultation with Somalia be held on a

### Recommendation on Article IV consultation cycle
- It is recommended that the next Article IV consultation with Somalia be held on a twenty-four-month cycle.

### Macroeconomic outlook and key aggregates (selected)
- Population: 15.6 Million, 2022 Estimate.
- Nominal GDP (millions of U.S. dollars): 2022: 10,203; 2023: 10,969; 2024 Est.: 12,804; 2025 Prog.: 12,111; 2026 Proj.: 13,891; 2027 Prog.: 13,018; 2028 Proj.: 14,197; 2029 Proj.: 15,584; 2030 Proj.: 16,973; 2031 Proj.: 18,205.
- Real GDP (millions of U.S. dollars): 2022: 10,203; 2023: 10,633; 2024 Est.: 11,108; 2025 Prog.: 11,058; 2026 Proj.: 11,541; 2027 Prog.: 11,501; 2028 Proj.: 11,972; 2029 Proj.: 12,463; 2030 Proj.: 12,999; 2031 Proj.: 13,584.
- Real GDP, annual percentage change: 2022: 2.7; 2023: 4.2; 2024 Est.: 3.7; 2025 Prog.: 4.0; 2026 Proj.: 3.9; 2027 Prog.: 4.0; 2028 Proj.: 4.1; 2029 Proj.: 4.1; 2030 Proj.: 4.3; 2031 Proj.: 4.5.
- Real GDP per capita in U.S. dollars: 2022: 653; 2023: 662; 2024 Est.: 673; 2025 Prog.: 670; 2026 Proj.: 680; 2027 Prog.: 678; 2028 Proj.: 687; 2029 Proj.: 697; 2030 Proj.: 710; 2031 Proj.: 723.
- CPI (period average, percent change): 2022: 6.8; 2023: 6.2; 2024 Est.: 4.8; 2025 Prog.: 5.3; 2026 Proj.: 3.9; 2027 Prog.: 4.2; 2028 Proj.: 3.6; 2029 Proj.: 3.4; 2030 Proj.: 3.2; 2031 Proj.: 3.0.
- CPI (e.o.p., percent change): 2022: 6.1; 2023: 6.6; 2024 Est.: 4.3; 2025 Prog.: 4.5; 2026 Proj.: 3.7; 2027 Prog.: 3.9; 2028 Proj.: 3.5; 2029 Proj.: 3.3; 2030 Proj.: 3.1; 2031 Proj.: 2.6.

### Fiscal indicators and public finances (Federal Government; selected)
- Central government finances (percent of GDP): Revenue and grants: 2022: 7.1; 2023: 6.8; 2024 Est.: 7.1; 2025 Prog.: 7.5; 2026 Proj.: 5.9; 2027 Prog.: 6.8; 2028 Proj.: 5.1; 2029 Proj.: 4.6; 2030 Proj.: 4.6; 2031 Proj.: 4.7.
- Revenues (percent of GDP): 2022: 2.6; 2023: 3.0; 2024 Est.: 2.8; 2025 Prog.: 3.0; 2026 Proj.: 2.1; 2027 Prog.: 3.3; 2028 Proj.: 3.6; 2029 Proj.: 3.9; 2030 Proj.: 4.2; 2031 Proj.: 4.5.
- Grants (percent of GDP): 2022: 4.5; 2023: 3.8; 2024 Est.: 4.3; 2025 Prog.: 4.6; 2026 Proj.: 2.8; 2027 Prog.: 3.5; 2028 Proj.: 1.5; 2029 Proj.: 0.8; 2030 Proj.: 0.5; 2031 Proj.: 0.3.
- Expenditure (FGS, percent of GDP): 2022: 7.1; 2023: 6.7; 2024 Est.: 7.5; 2025 Prog.: 7.7; 2026 Proj.: 7.2; 2027 Prog.: 8.0; 2028 Proj.: 7.1; 2029 Proj.: 6.9; 2030 Proj.: 6.9; 2031 Proj.: 7.1.
- Compensation of employees (percent of GDP): 2022: 2.5; 2023: 2.7; 2024 Est.: 2.8; 2025 Prog.: 3.0; 2026 Proj.: 2.7; 2027 Prog.: 2.9; 2028 Proj.: 2.8; 2029 Proj.: 2.7; 2030 Proj.: 2.6; 2031 Proj.: 2.6.
- Purchase of non-financial assets (percent of GDP): 2022: 0.1; 2023: 0.2; 2024 Est.: 0.3; 2025 Prog.: 0.3; 2026 Proj.: 0.3; 2027 Prog.: 0.3; 2028 Proj.: 0.4; 2029 Proj.: 0.4; 2030 Proj.: 0.6; 2031 Proj.: 1.0.
- Overall balance (percent of GDP): 2022: 0.0; 2023: 0.1; 2024 Est.: -0.5; 2025 Prog.: -0.2; 2026 Proj.: -1.3; 2027 Prog.: -1.2; 2028 Proj.: -2.0; 2029 Proj.: -2.3; 2030 Proj.: -2.3; 2031 Proj.: -2.4.
- Net change in the stock of cash (percent of GDP): 2022: 0.4; 2023: 0.3; 2024 Est.: -0.4; 2025 Prog.: -0.1; 2026 Proj.: -0.3; 2027 Prog.: -0.6; 2028 Proj.: 0.0; 2029 Proj.: 0.0; 2030 Proj.: 0.0; 2031 Proj.: 0.0.
- Public debt (percent of GDP): 2022: 38.2; 2023: 7.0; 2024 Est.: 6.1; 2025 Prog.: 6.4; 2026 Proj.: 6.6; 2027 Prog.: 6.6; 2028 Proj.: 8.1; 2029 Proj.: 9.6; 2030 Proj.: 11.1; 2031 Proj.: 12.7.
  - Notes: Public debt includes arrears, penalties, judicially awarded damages, and net SDR position of the FGS; includes HIPC and MDRI relief at Completion Point in 2023.

### Monetary sector and banking (selected)
- Net Foreign Assets (program definition, gross international reserves, in millions of US$): 2022: 265.5; 2023: 265.3; 2024 Est.: 265.3; 2025 Prog.: 265.3; 2026 Proj.: 265.3; 2027 Proj.: 265.3; 2028 Proj.: 263.4; 2029 Proj.: 259.6; 2030 Proj.: 251.1; 2031 Proj.: 230.7.
  - In months of next year's imports: 2022: 0.4; 2023: 0.3; 2024 Est.: 0.3; 2025 Prog.: 0.3; 2026 Proj.: 0.3; 2027 Proj.: 0.3; 2028 Proj.: 0.3; 2029 Proj.: 0.2; 2030 Proj.: 0.2; 2031 Proj.: 0.2.
- Net Foreign Assets (monetary survey, millions of U.S. Dollars): 2022: -140; 2023: 176; 2024 Prog.: 192; 2025 Proj.: 193; 2026 Proj.: 207; 2027 Proj.: 206; 2028 Proj.: 224; 2029 Proj.: 246; 2030 Proj.: 266; 2031 Proj.: 272.
- Broad Money (millions of U.S. Dollars): 2022: 144.6; 2023: 174.3; 2024 Est.: 182.2; 2025 Prog.: 191.4; 2026 Proj.: 187.6; 2027 Proj.: 203.9; 2028 Proj.: 219.5; 2029 Proj.: 226.5; 2030 Proj.: 233.9; 2031 Proj.: 240.5.
- Credit to the private sector (percent of GDP): 2022: 3.9; 2023: 4.9; 2024 Est.: 4.8; 2025 Prog.: 5.1; 2026 Proj.: 5.0; 2027 Proj.: 5.3; 2028 Proj.: 5.6; 2029 Proj.: 5.8; 2030 Proj.: 6.1; 2031 Proj.: 6.4.
- Consolidated commercial banks (selected, millions of U.S. Dollars): Total assets: 2020: 764; 2021: 1,182; 2022: 1,259; 2023: 1,617; 2024 Mar: 1,675; 2024 June: 1,727. Customer deposits: 2020: 659; 2021: 900; 2022: 1,164; 2023: 1,431; 2024 Mar: 1,463; 2024 June: 1,555.
- Commercial banks: Credit to private sector (millions): 2020: 219; 2021: 319; 2022: 400; 2023: 535; 2024 Mar: 559; 2024 June: 601.
- Banking ratios (memorandum): Credit to private sector share of total assets (percent): 2020: 29; 2021: 27; 2022: 32; 2023: 33; 2024 Mar: 33; 2024 June: 35. Loan to deposits (percent): 2020: 33; 2021: 35; 2022: 34; 2023: 37; 2024 Mar: 38; 2024 June: 39.

### Balance of payments and external sector (selected)
- Current account balance (millions of U.S. dollars): 2022: -877; 2023: -1,021; 2024 Est.: -1,108; 2025 Prog.: -1,082; 2026 Proj.: -1,228; 2027 Proj.: -1,138; 2028 Proj.: -1,385; 2029 Proj.: -1,552; 2030 Proj.: -1,703; 2031 Proj.: -1,828.
- Current account balance (percent of GDP): 2022: -8.6; 2023: -9.3; 2024 Est.: -8.7; 2025 Prog.: -8.9; 2026 Proj.: -8.8; 2027 Proj.: -8.7; 2028 Proj.: -9.8; 2029 Proj.: -10.0; 2030 Proj.: -10.0; 2031 Proj.: -10.0.
- Trade balance (millions): Overall trade balance: 2022: -6,418; 2023: -6,672; 2024 Est.: -7,446; 2025 Prog.: -7,431; 2026 Proj.: -7,941; 2027 Proj.: -7,959; 2028 Proj.: -8,311; 2029 Proj.: -9,015; 2030 Proj.: -9,781; 2031 Proj.: -10,443.
- Exports of goods and services (millions): 2022: 1,804; 2023: 2,164; 2024 Est.: 2,424; 2025 Prog.: 2,480; 2026 Proj.: 2,788; 2027 Proj.: 2,742; 2028 Proj.: 3,093; 2029 Proj.: 3,503; 2030 Proj.: 3,874; 2031 Proj.: 4,197.
- Imports of goods and services (millions): 2022: 8,222; 2023: 8,836; 2024 Est.: 9,870; 2025 Prog.: 9,911; 2026 Proj.: 10,728.8; 2027 Proj.: 10,701; 2028 Proj.: 11,404; 2029 Proj.: 12,518; 2030 Proj.: 13,656; 2031 Proj.: 14,640.
- Remittances (millions): 2022: 2,142; 2023: 2,102; 2024 Est.: 2,408; 2025 Prog.: 2,401; 2026 Proj.: 2,619; 2027 Proj.: 2,588; 2028 Proj.: 2,853; 2029 Proj.: 3,131; 2030 Proj.: 3,410; 2031 Proj.: 3,658.
- Grants (current transfers, net, millions): 2022: 3,443; 2023: 0; 2024 Est.: 3,592; 2025 Prog.: 3,972; 2026 Proj.: 3,987; 2027 Proj.: 4,140; 2028 Proj.: 4,275; 2029 Proj.: 4,120; 2030 Proj.: 4,382; 2031 Proj.: 4,723; 2032 Proj.: 5,016; 2033 Proj.: 5,016 (table shows sequence).
- External debt (millions of U.S. dollars): 2022: 3,827; 2023: 698; 2024 Est.: 712; 2025 Prog.: 710; 2026 Proj.: 854; 2027 Proj.: 793; 2028 Proj.: 1,082; 2029 Proj.: 1,438; 2030 Proj.: 1,828; 2031 Proj.: 2,263.
- External debt (percent of GDP): 2022: 37.5; 2023: 6.4; 2024 Est.: 5.6; 2025 Prog.: 5.9; 2026 Proj.: 6.1; 2027 Proj.: 6.1; 2028 Proj.: 7.6; 2029 Proj.: 9.2; 2030 Proj.: 10.8; 2031 Proj.: 12.4.

### External financing, IMF program, and financing schedule
- Schedule of Reviews and Disbursements (ECF arrangement, millions of SDRs / percent of quota): Approval of arrangement (December 19, 2023): 30.000000 SDR / 18.359853 percent of quota. Subsequent reviews/disbursements: April 15, 2024: 7.500000 / 4.589963; October 15, 2024: 7.500000 / 4.589963; April 15, 2025: 7.500000 / 4.589963; October 15, 2025: 7.500000 / 4.589963; April 15, 2026: 7.500000 / 4.589963; October 15, 2026: 7.500000 / 4.589963. Total: 75.000000 SDR / 45.899633 percent of quota. Somalia's quota is SDR163.4 million.
- External Financing Needs and Sources (millions of U.S. dollars, selected): Gross financing requirement: 2022: 6,500.6; 2023: 9,863.3; 2024: 7,452.1; 2025: 7,982.6; 2026: 8,335.6; 2027: 9,040.6; 2028: 9,805.7; 2029: 10,475.5. Available financing: 2022: 6,256.7; 2023: 6,533.1; 2024: 7,227.6; 2025: 7,848.8; 2026: 8,032.8; 2027: 8,668.9; 2028: 9,400.3; 2029: 10,006.1. Financing gap / remaining gap: 2022: 243.9; 2023: 3,330.2; 2024: 224.5; 2025: 133.8; 2026: 302.8; 2027: 371.7; 2028: 405.4; 2029: 469.4.
- Identified financing (millions): Budget grants: 2022: 171.4; 2023: 141.3; 2024: 185.0; 2025: 158.0; 2026: 202.4; 2027: 170.0; 2028: 15.0; 2029: 37.4; 2030 onwards: 0.00 (projection entries show 0.00 beyond certain years). IMF financing: 2022: 27.9; 2023: 58.7; 2024: 20.1; 2025: 20.1; 2026: 20.2; 2027: 20.2; 2028 onward: 0.00 (disbursements in 2024-26 are conditional on Board approval of ECF reviews). Official loans (net): 2022: 44.6; 2023: 41.6; 2024: 2.0; 2025: 76.3; 2026: 282.6; 2027: 371.7; 2028: 405.4; 2029: 469.4. Note: Identified financing equals the remaining gap in the presented period.

### Fiscal operations and donor support details (selected operational notes)
- Fiscal operations are recorded on a cash basis; budget data are for the Federal Government of Somalia; GDP data cover the entire territory of Somalia.
- A change in World Bank policy for countries with moderate risk of debt distress (replacing a 50:50 mix of grants and loans with 100 percent loans with 50-year maturity) will impact Somalia starting in July 2025; lower grants would result in deficits of 1.5 to 2.0 percent of GDP, higher than projected under the alternative before this policy change.
- Public debt reporting includes HIPC debt relief, MDRI, and beyond-HIPC debt relief at Completion Point in 2023.
- On-budget donor support shown includes only donor support provided to the federal government through treasury accounts at the Central Bank of Somalia.
- For Somalia's de facto dollarized economy, reserve-to-imports coverage is noted as less applicable.

*Source: Somalia — IMF staff estimates and projections as presented in the content unit.*

### 1.  Principal

### 1. Principal

### Repurchases, Repayments, Charges, and Outstanding Fund Credit
- Repurchases and Repayments (series): 250.4 0.0 0.0 0.0 1.4 2.8 6.3 15.2 18.2 19.8 20.6 17.1 8.3 5.3 2.3 0.0 0.0
- SDR related charges (series): 0.0 1.5 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9
- Total obligations (series): 250.4 1.5 0.9 2.3 3.7 7.2 16.1 19.1 20.7 21.5 18.0 9.2 6.2 3.2 0.9 0.9
- Outstanding Fund credit, end of period (series): 72.0 87.0 102.0 115.6 112.8 106.5 91.4 73.2 53.5 32.9 15.8 7.5 2.3 0.0 0.0 0.0 0.0
- Net Use of Fund Credit (series): -206.4 15.0 15.0 15.0 13.6 -2.8 -6.3 -15.2 -18.2 -19.8 -20.6 -17.1 -8.3 -5.3 -2.3 0.0 0.0
- Disbursements and Purchases (series): 44.0 15.0 15.0 15.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Repayments and Repurchases (repeat series): 250.4 0.0 0.0 0.0 1.4 2.8 6.3 15.2 18.2 19.8 20.6 17.1 8.3 5.3 2.3 0.0 0.0

### Memorandum items: Outstanding Fund Credit, Total Obligations, and Ratios (series)
- Outstanding Fund credit, in percent of Exports of goods and services: 4.4 4.7 4.9 5.0 4.3 3.7 2.9 2.1 1.4 0.8 0.4 0.2 0.0 0.0 0.0 0.0 0.0
- Outstanding Fund credit, in percent of External public debt: 13.7 16.3 17.1 14.3 10.5 7.8 5.4 3.6 2.2 1.2 0.5 0.2 0.1 0.0 0.0 0.0 0.0
- Outstanding Fund credit, in percent of Gross official reserves: 36.1 43.6 51.1 58.4 57.8 56.4 52.6 44.5 32.5 20.0 9.6 4.6 1.4 0.0 0.0 0.0 0.0
- Outstanding Fund credit, in percent of GDP: 0.9 1.0 1.0 1.1 1.0 0.8 0.7 0.5 0.3 0.2 0.1 0.0 0.0 0.0 0.0 0.0 0.0
- Outstanding Fund credit, in percent of Quota: 44.1 53.2 62.4 70.7 69.0 65.2 55.9 44.8 32.7 20.1 9.6 4.6 1.4 0.0 0.0 0.0 0.0
- Total Obligations, in percent of Exports of goods and services: 15.4 0.1 0.0 0.0 0.1 0.1 0.2 0.5 0.6 0.6 0.5 0.4 0.2 0.1 0.1 0.0 0.0
- Total Obligations, in percent of External public debt: 47.7 0.3 0.2 0.3 0.3 0.5 0.9 0.9 0.8 0.8 0.6 0.2 0.1 0.1 0.0 0.0 0.0
- Total Obligations, in percent of Gross official reserves: 125.5 0.7 0.5 1.2 1.9 3.8 9.3 11.6 12.6 13.1 11.0 5.6 3.8 1.9 0.6 0.6 0.0
- Total Obligations, in percent of GDP: 3.0 0.0 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0
- Quota (series): 163.4 repeated across periods (16 repetitions in table)

*Source: IMF staff estimates and projections.*

### Note on projections
- 1/ Projections are based on current IMF charges.

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### Quantitative Performance Indicators and Indicative Targets (Under the ECF Arrangement, March 2024–September 2025)
- Table title provided: "Table 10. Somalia: Quantitative Performance Indicators and Indicative Targets Under the ECF Arrangement (March 2024–September 2025) (Millions of U.S. Dollars)" (data presented in preceding Principal tables).

---

### Structural Benchmarks Under the ECF (March 2024–November 2025)

### Completed and delayed benchmarks (selected)
- 1 Publish a Tax Policy and Revenue Administration Roadmap approved by the Minister of Finance
  - Target: End-June 2024
  - Sector/Agency: Domestic revenue / MOF
  - Rationale: Support domestic revenue generation and revenue administration
  - Monitoring: Publish roadmap approved by the Minister of Finance on the MOF website.
  - Status: Met
- 2 Submit the Income Tax Bill to Parliament
  - Target: End-June 2024
  - Sector/Agency: Domestic revenue / MOF
  - Monitoring: Send to the IMF staff the version of the Bill submitted to Parliament
  - Status: Not met, implemented with delay on July 9, 2024
- 3 Ensure full payroll integration of FGS employees in the SFMIS payroll module by reducing the ratio of non-payroll compensation of employee payments to total compensation of employees to less than 1 percent
  - Target: End-June 2024
  - Sector/Agency: PFM / MOF NCSC MOLSA
  - Rationale: Strengthen payroll integrity, expenditure controls, and governance
  - Monitoring: Submit to IMF staff monthly SFMIS reports; reduce ratio to less than 1 percent on average between April and June 2024 (relative to 10.9 percent in May-July 2023)
  - Status: Met
- 4 (1) Issue a Prime Ministerial Decree articulating key debt policy parameters and procedures for new borrowing and sovereign guarantees; (2) amend PFM regulations to define “other financial liabilities” considered guarantees as per Article 37 (6) of the PFM Act
  - Target: End-June 2024
  - Sector/Agency: Public debt/ MOF
  - Monitoring: Publish approved Prime Ministerial Decree on MoF website; publish amended PFM regulations on MoF website.
  - Status: Not met, implemented with delay on July 15, 2024
- 5 Submit the PPP Bill to Parliament with a framework that adequately manages fiscal risks and establishes a gateway process managed by the Ministry of Finance
  - Target: End-June 2024
  - Sector/Agency: Governance / MOF
  - Monitoring: Send to the IMF staff the version of the Bill submitted to Parliament
  - Status: Not met, implemented with delay on August 12, 2024
- 6 Develop an action plan to improve the quality of data submitted by commercial banks and communicate it to commercial banks
  - Target: End-July 2024
  - Sector/Agency: Financial Supervision / CBS
  - Monitoring: Provide IMF staff with the action plan approved by the CBS Board and copies of letters from the CBS Governor to commercial banks with the details of the action plan approved by the CBS Board.
  - Status: Met
- 7 Develop a roadmap to implement the Pay and Grade policy (elements include plan/timeline to align salaries of temporary workers with pay scale of permanent workers and plan/timeline for costing exercise)
  - Target: End-December 2024; Proposed new target date: End-February 2025
  - Sector/Agency: PFM / MOF NCSC MOLSA
  - Monitoring: Publish the roadmap approved by the Cabinet on the Ministry of Finance website.
- 8 (i) Publish updated PFM regulations on digital signatures for the purchase order to payment process; and (ii) implement digital signatures in the SFMIS
  - Target: End-June 2025
  - Sector/Agency: PFM / MOF
  - Monitoring: Publish amended PFM regulations; confirm implementation of digital signatures in SFMIS; provide list of users and number and amount of payment vouchers processed using digital signatures.
- 9 Submit to Parliament amendments to the CBS Law, including to cover the currency board arrangement
  - Target: End-March 2025; Proposed new target date: End-December 2025
  - Sector/Agency: Financial Supervision / CBS
  - Monitoring: Send to IMF staff the version of the Bill submitted to Parliament

### Additional proposed structural benchmarks (selected)
- 10 Ensure sustained end-to-end use of SOMCAS in Mogadishu seaport and airport by fully discontinuing PCMIS
  - Target: End-June 2025
  - Monitoring: Ratio of total customs duties reported in SFMIS to total customs duties paid through SOMCAS should be at least 99 percent on average across May and June 2025; letter from Minister confirming PCMIS no longer used at Mogadishu seaport nor airport.
- 11 Publish an Annual Debt Management Report (ADMR) for FY2024 in line with IMF TA recommendations
  - Target: End-April 2025
  - Monitoring: Publish ADMR approved by Minister of Finance on MoF website.
- 12 Issue detailed instructions to capital adequacy (CAR) and liquidity coverage ratios (LCR) templates reported by banks
  - Target: End-July 2025
  - Monitoring: Send IMF staff the detailed instructions communicated to banks.
- 13 Publish regulations for the Extractive Industries Fiscal Regime Law (EIFRL), in line with IMF recommendations
  - Target: End-January 2025
  - Monitoring: Publish approved EIFRL regulations on MoF website.
- 14 Publish a new regulation for the Petroleum Act clarifying publication standards for all production sharing agreements (PSAs)
  - Target: End-March 2025
  - Monitoring: Publish approved Petroleum Act regulation on the MPMR website.
- 15 Publish the amended regulation harmonizing the Petroleum and Procurement Acts to require IMCC review and approval of all PSAs
  - Target: End-December 2024
  - Monitoring: Publish approved regulation on the MoF website.
- 16 No new PSAs in the petroleum sector will be signed until the legal framework is completed (with an exception for PSAs negotiated under the existing specific defense and security framework agreement approved by Parliament in February 2024)
  - Status: Continuous until legal framework completed
  - Monitoring: Ministry of Petroleum will refrain from signing new PSAs; MoF will provide IMF staff a monthly letter (within 30 days of end of month) confirming that no new PSAs have been signed.

### Acronyms used in monitoring note
- MOF: Ministry of Finance
- CBS: Central Bank of Somalia
- SFMIS: Somalia Financial Management Information System
- PFM: public financial management
- NCSC, MOLSA, MPMR, FRC, FMS, MOJ: (agencies referenced in original table for responsibilities and monitoring)

---

### Summary Table on Projected External Borrowing Program (January 1, 2024 - December 31, 2024)
- PPG external debt contracted or guaranteed: Volume of new debt, USD million: 20.1 (100 percent)
- Sources of debt financing: Concessional debt, 1/: 20.1 (100)
  - o/w IMF prospective: 20.1
  - o/w Other 2/: 0.00
- Non-concessional debt: 0.00
  - o/w Semi-concessional 3/: 0.00
  - o/w Commercial terms 4/: 0.00
- Uses of debt financing: Project Financing: 0.00; Budget Financing: 20.1 (100)
- Type of interest rate: Fixed Interest Rate: 20.1 (100); Variable Interest Rate: 0.00
- Currency denomination: USD denominated loans: 20.1 (100); Loans denominated in other currency: 0.00
- Memorandum items:
  - Indicative projection FY2025: 95.2
  - Indicative projection FY2026: 302.8
- Footnotes in table:
  - 1/ Debt with a grant element of at least 35 percent.
  - 2/ Can include multilateral lenders such as the World Bank and the AfDB.
  - 3/ Debt with a positive grant element that is lower than the minimum grant element of 35 percent.
  - 4/ Debt without a positive grant element.
  - 5/ HIPC Completion Point reached in December 2023.

---

### Decomposition of Public Debt and Debt Service by Creditor, 2022–2025 (Selected figures)
- Table headline: "Table 13. Somalia: Decomposition of Public Debt and Debt Service by Creditor, 2022-2025"
- Total (In millions of US$): 3,894.8 (2022)
  - Percent total debt: 100.0
  - Percent GDP (selected entries across years): 38.2 16.4 17.4 12.6 12.3 0.2 0.2 0.1 0.1
- External: 3,827.0 (2022) — 98.3 percent of total debt
- Multilateral creditors total (2022): 1,074.8 (27.6 percent total debt)
  - IMF (2022): 370.5 (9.5 percent total debt)
  - World Bank (IDA) (2022): 104.6 (2.7 percent)
  - AfDB (2022): 20.1 (0.5 percent)
  - Other Multilaterals (2022): 579.6 (14.9 percent)
  - Arab Monetary Fund (2022): 298.6 (7.7 percent)
  - Arab Fund for Economic and Social Development (2022): 191.5 (4.9 percent)
  - IFAD (2022): 26.2 (0.7 percent)
  - Islamic Development Bank (2022): 27.2 (0.7 percent)
  - OPEC Fund (2022): 36.1 (0.9 percent)
- Bilateral creditors total (2022): 2,749.7 (70.6 percent total debt)
  - Paris Club (2022): 2,004.6 (51.5 percent)
  - United States (2022): 998.4 (25.6 percent)
  - Russia (debt stock as of end-2022): 711.1 (18.3 percent)
  - Other bilateral creditors listed with smaller amounts (Kuwait 125.3, UAE 253.5, Iraq 201.9, Saudi Arabia 118.9, Libya 30.4, etc.)
- Commercial creditors (2022): 2.5 (0.1 percent)
  - Serbia (2022): 2.5 (0.1 percent)
- Domestic debt (2022): 67.8 (1.7 percent)
  - Of which: in arrears: 67.8 (1.7 percent)
- Nominal GDP (in millions of US$) listed: 10,203 (2022), 10,203 (2023), 10,969 (2024), 12,111 (2025), 13,018 (subsequent)
- Relevant notes:
  - 5/ Debt cancellation of 100 percent of ODA debt became effective on March 2021.
  - 6/ No debt reduction at the HIPC Decision Point; Japan will cancel 100% of their debt stock under the HIPC Completion Point.
  - 7/ Debt stock as of end-2022 consistent with HIPC Debt Reconciliation Exercise in 2023; bilateral agreement between Russia and Somalia signed in 2023.
  - 8/ IDA-administered EEC loans are treated as Paris Club debt.
  - 9/ Amount reported for non-PC creditors assumes PC comparable treatment and reflects estimates of interim debt relief under Cologne Terms computed as part of the HIPC DRA exercise.
  - 10/ Debt service for 2024 assumes full delivery of debt relief under the HIPC Initiative, MDRI, and beyond-HIPC assistance at the Completion Point reached in December 2023, assuming PC comparable treatment for all pending creditors.

---

### Progress on Negotiations with Creditors for Restructuring Outstanding HIPC-Eligible Debt (As of September 21, 2024)
- Table headline: "Table 14. Somalia: Progress on Negotiations with Creditors for Restructuring Outstanding HIPC-Eligible Debt (As of September 21, 2024)"
- Enhanced HIPC debt relief in PV terms (in US$ million) and percentage of total assistance under HIPC (selected entries):
  - AFESD: 99.1 (5.2) — "The authorities and AFESD have reached a general consensus on the terms of a debt relief agreement in line with the HIPC Common Reduction Factor (CRF). Negotiations continue on further softening of debt servicing terms."
  - AMF: 155.6 (8.2) — "The authorities and AMF have reached a general consensus on the terms of a debt relief agreement in line with the HIPC Common Reduction Factor (CRF). Negotiations continue on further softening of debt servicing terms. Joint efforts... to secure grants from a number of Arab member countries to cover the AMF debt repayment for three and a half years."
  - IsDB: 15.5 (0.8) — "A debt rescheduling agreement over 30-years maturity period including zero grace period and zero interest rate with first principle repayment beginning on 31st December 2024 was officially signed on July 16, 2024."
  - OFID: 19.3 (1.0) — "A debt rescheduling agreement over 20-years maturity period including 10-years grace period with interest rate of 0.5% per annum was officially signed on June 25, 2024."
- Totals:
  - Total Multilateral: 822.5 (43.2) — o/w Pending: 254.7 (13.4)
  - Paris Club Creditors: 806.6 (42.4) — Paris Club completed debt treatment for Somalia under HIPC process during March 13, 2024 HIPC exit debt treatment; several bilateral PC creditors signed agreements (United Kingdom, United States, Norway, Netherlands, Denmark); Japan, France, Russia, Spain shared draft agreements.
  - Total Bilateral and Commercial: 1,081.0 (56.8) — o/w Pending: 180.4 (9.5)
  - TOTAL: 1,903.5 (100.0) — o/w Total Pending: 435.1 (22.9)
- Non-Paris Club and bilateral creditor negotiation statuses (selected):
  - Algeria: 0.3 (0.0) — "Authorites continue to reach out; official response awaited."
  - Bulgaria: 1.9 (0.1) — "Letter sent July 16, 2024; creditor response awaited."
  - Iraq: 32.3 (1.7) — "Authorities requested 100% debt cancellation of remaining 33% of outstanding debt; request is being considered by Iraq."
  - Libya: 14.0 (0.7) — "Fresh letter sent August 19, 2024; creditor response awaited."
  - United Arab Emirates (Abu Dhabi Fund for Development): 131.0 (6.9) — "Negotiations for debt relief on Paris Club comparable terms with the Abu Dhabi Fund for Development have advanced, especially on softening of debt servicing terms."
  - Serbia (commercial): 0.4 (0.0) — "Letter sent July 16, 2024; creditor response awaited."
- Sources: Somali authorities; and IMF and World Bank staff estimates.
- Footnote: 1/ The data are in December 31, 2018 PV terms as revised at completion point.

*Source: IMF staff estimates and projections.*

### Annex I. Implementation of IMF Recommendations

### Annex I. Implementation of IMF Recommendations

### Revenue Mobilization
- Recommendation: Strengthen revenues through customs modernization, new taxes, and better administration.
- Actions since 2022 Article IV:
  - Introduced turnover tax.
  - Deployed point-of-sale machines in the tourism sector.
  - Extended the scope of application of the sales tax to a range of services.
  - Developed a Medium-Term Revenue Roadmap for 2024-2027 specifying reforms to expand the tax base, improve tax compliance, and digitalize collections.
  - Submitted the new Income Tax Bill to Parliament.
  - Implemented SOMCAS in Mogadishu and Kismayo to improve customs administration efficiency.
- Key statistic:
  - Domestic revenues increased from about 1 percent of GDP in 2013 to an estimated 3 percent of GDP in 2023.
- Additional initiatives (detailed in Annex III):
  - SOMCAS implemented in October 2023 in Mogadishu and Kismayo.
  - New spectrum fees for telecom operators introduced in September 2022.
  - New turnover tax for micro and small businesses introduced in July 2023.
  - Digitalization of rental income tax and road tax.
  - Regular reporting on tax exemptions.
  - In July 2024, Income Tax bill submitted to Parliament and Medium-term Revenue Roadmap for 2024-2027 published.
  - In August 2024, new sales tax electronic system implemented collecting sales tax directly from consumers into merchant mobile money/mobile wallet accounts.

### Public Financial Management (PFM)
- Recommendations: Implement the pay and grade policy; fully integrate all compensation of employees into the payroll; implement invoice tracking functionality and emergency procurement guidelines; continue to enhance fiscal reporting and accountability of both FGS and FMS.
- Actions since 2022 Article IV:
  - Approved the Pay and Grade policy and roadmap for payroll integration.
  - Reduced the share of non-payroll payments to total compensation to less than 1 percent by June-2024.
  - Launched invoice tracking functionality of SFMIS for electricity and internet service.
  - Issued guidelines on emergency procurement.
  - Conducted a debt reconciliation exercise in 2023 prior to the HIPC Completion Point to improve debt transparency.
  - Enacted the Audit Law in September 2023 to establish legal groundwork for a federal audit system.
- Additional PFM reforms (Annex III):
  - 2019 PFM Act and supporting regulations.
  - Updated core PFM processes for budget preparation, payment, accounting, and payroll management.
  - Implementation of Somalia Financial Management Information System (SFMIS) and linkage with the Central Bank of Somalia for electronic payments and automatic bank account reconciliation.
  - Regular publication of audited annual financial statements for the FGS since 2019.
  - Introduction of an Invoice Tracking System in May 2023.
  - Establishment of Ministry of Finance authority over financial clearance of FGS employee compensation in October 2023.
  - Full integration of all compensation of employees into the single payroll in SFMIS as of June 2024.
  - Issuance of a new decree articulating key parameters for debt policy.
  - Emergency procurement guidelines issued in July 2023.
  - SOPs for the Inter-Ministerial Concessions Committee issued in September 2023.
  - Regulations implementing PFM Act provisions on public property and Asset Management Guidelines published in September 2023.
  - PPP bill submitted to Parliament in August 2024.

### Fiscal Sustainability
- Recommendation: Maintain a prudent fiscal deficit, and only access concessional financing.
- Actions since 2022 Article IV:
  - Authorities have been fiscally prudent, only tapping into concessional and grant sources of financing, refraining from contracting non-concessional debt.
  - Improved debt management via issuance of a Prime Ministerial Decree and regulations on debt policy.

### Financial Supervision and Sector Governance
- Recommendation: Continue to bolster financial regulation and supervision capacity; improve the quality of data reporting.
- Actions since 2022 Article IV:
  - CBS issued banking regulations on capital and liquidity requirements covering risk management aspects.
  - CBS developed an action plan to improve the quality of data submitted by commercial banks.
- Financial sector governance progress (Annex III):
  - Implemented most recommendations of the 2020 and 2024 IMF Safeguards Assessment, including publication of audited CBS financial statements with a clean auditor’s opinion, improvements to internal controls, and expanded disclosures.
  - Ongoing implementation of remaining 2024 safeguards recommendations.
  - Implementation of International Financial Reporting Standards.
  - Restoration of governance bodies—the Board and Audit Committee—and exercise of oversight responsibilities.
  - Strengthened resources and capacity of the CBS Licensing and Supervision Department.
  - Licensing and regular on- and off-site supervision of all commercial banks and money transfer businesses.
  - Mobile money operators regulated since 2020; 5 MMOs licensed accounting for more than 80 percent of the mobile money market in Somalia.
  - Banking regulations on capital adequacy and liquidity coverage ratios issued in July 2023.
  - In July 2024, CBS finalized an action plan to improve the quality of supervisory data submitted by commercial banks.

### Monetary Policy and Currency Reform
- Recommendation: Define the monetary and exchange rate policy framework in the context of the currency reform.
- Action since 2022 Article IV:
  - Authorities decided to adopt a currency board arrangement as the monetary and exchange rate policy framework for the planned currency reform.

### Central Bank Capacity Building
- Recommendation: Build capacity in systemic financial stability oversight, monetary and exchange policy and operation, and reserve and debt management.
- Action since 2022 Article IV:
  - CBS continued to improve technical capacity of staff working on financial supervision and audit, including through IMF technical assistance.

### AML/CFT and Financial Integrity
- Recommendation: Continue to address ML/FT risks; enact the Targeted Financial Sanctions Law; make progress with the National ML/FT Risk Assessment action plan.
- Actions since 2022 Article IV:
  - Enacted the Targeted Financial Sanctions Act and issued related regulations.
  - Enacted the Counter Terrorism Act and issued AML/CFT guidance and directives to financial institutions.
  - Submitted amendments to the AML/CFT Act to parliament.
  - Initiated rollout of the Somali National Digital ID.
- Annex III AML/CFT progress:
  - AML/CFT Act passed in 2016; Financial Reporting Center established.
  - National AML/CFT Taskforce operational since February 2021 to support NAMLC.
  - National ML/FT Risk Assessment (NRA) finalized and published.

### Governance Weaknesses and Extractives Framework
- Recommendations: Finalize the legal framework for the extractive industries; improve control of government lands and real estate; advance implementation of the NACS and the UNCAC.
- Actions since 2022 Article IV:
  - Extractive Industries Fiscal Regime Law enacted in 2023.
  - PFM Regulations amended to implement PFM Act provisions on public property.
  - Asset Management Guidelines issued to standardize government asset management and promote transparency and accountability.
  - Somalia became a state party to Arab Anti-Corruption Convention.
- Market regulation and extractives (Annex III):
  - Telecommunications Act passed in 2017; National Communication Agency established; licensing published.
  - Petroleum Act enacted in 2020; National Petroleum Authority formed.
  - Model Oil and Gas Production Sharing Agreement approved by IMCC in November 2021.
  - PFM regulations on natural resource revenue management issued in May 2022.
  - Revised tender protocol approved by IMCC in November 2022.
  - Extractive Industries Fiscal Regime Law enacted in June 2023.

### Promote Inclusive Growth
- Recommendation: Advance further reforms across all pillars of the National Development Plan 9 (NDP9).
- Actions since 2022 Article IV:
  - Reforms across most pillars of NDP9 have progressed.
  - The 2024 budget included a costing of NDP9.

### Risk Assessment Matrix — Conjunctural Risks (selected)
- Intensification of regional conflict(s).
  - Overall Level of Concern: High
  - Relative Likelihood: High
  - Expected Impact:
    - Intensifying spillovers from Russia’s war in Ukraine or the conflict in Gaza and ensuing commodity price shocks can exacerbate inflation in Somalia.
    - Humanitarian support can be affected by supply shocks (of food).
    - Drag on global growth could reduce remittances, affecting local consumption and investment.
    - Escalation can have negative repercussions on security, trade, and fiscal revenues in Somalia.
- Commodity price volatility.
  - Overall Level of Concern: High
  - Relative Likelihood: (not explicitly stated)
  - Expected Impact:
    - External and fiscal pressures and food insecurity; cross-border spillovers; social and economic instability.
- Social discontent.
  - Overall Level of Concern: High
  - Relative Likelihood: High
  - Expected Impact:
    - High inflation, real income loss, spillovers from conflicts, and worsening inequality stir social unrest, drive populist policies, increase resistance to reforms; can intensify precarious security situation in Somalia.
- Global growth surprises (slowdown / acceleration).
  - Overall Level of Concern: Medium (slowdown), Low (acceleration)
  - Relative Likelihood: Medium (slowdown), Low (acceleration)
  - Expected Impact:
    - Slowdown: Reduced remittances and suppressed exports; negative macro-fiscal impact.
    - Acceleration: Positive effects on remittances, exports, and domestic growth.
- Monetary policy miscalibration.
  - Overall Level of Concern: Medium
  - Relative Likelihood: Medium
  - Expected Impact:
    - As a de facto dollarized economy, Somalia imports monetary policy from advanced economies; food and commodity shocks can significantly impact poor households, exacerbating food insecurity.
- Systemic financial instability.
  - Overall Level of Concern: Medium
  - Relative Likelihood: Low
  - Expected Impact:
    - Would negatively affect the incipient financial system and reduce the availability of credit.
- Sovereign debt distress.
  - Overall Level of Concern: Medium
  - Relative Likelihood: Low
  - Expected Impact:
    - Somalia’s external and overall public debt-to-GDP ratios are low following HIPC completion point; limited access to international capital markets and nascent domestic financial sector imply limited impact.

### Risk Assessment Matrix — Structural Risks (selected)
- Deepening geoeconomic fragmentation.
  - Overall Level of Concern: High
  - Relative Likelihood: Low
  - Expected Impact:
    - Somalia’s limited trade partners imply initial limited impact, but fragmentation will constrain integration into value addition chains in the medium- to long-term.
- Cyberthreats.
  - Overall Level of Concern: High
  - Relative Likelihood: Low
  - Expected Impact:
    - Somalia’s weak digital infrastructure and minimal participation in digital currencies and crypto assets limit immediate exposure.
- Climate change.
  - Overall Level of Concern: Medium
  - Relative Likelihood: High
  - Expected Impact:
    - Pastoral agriculture and livestock are central to the economy; recurring droughts can be macro-critical and cause widespread suffering.
- Note: The RAM definitions specify "low" as probability below 10 percent, "medium" between 10 and 30 percent, and "high" between 30 and 50 percent. Conjunctural shocks are more likely to materialize within 12 to 18 months; structural risks persist over a longer horizon.

### Progress in Improving Governance and Transparency (Annex III summary)
- Overall: Authorities acknowledge ubiquity of corruption and have identified steady, incremental governance progress as a key pillar of National Development Plan 2020-24 and National Transformation Plan 2025-2029. Reforms supported by IMF CD and other partners continue under the ECF arrangement in revenue, PFM, fiscal transparency, financial governance, AML/CFT, petroleum sector legal framework, and procurement and concessions.
- Fiscal governance:
  - Revenue mobilization improvements summarized above (1 percent of GDP in 2013 to an estimated 3 percent of GDP in 2023).
  - SOMCAS implementation, spectrum fees, turnover tax, digitalization, reporting on exemptions, Income Tax bill submission, Medium-term Revenue Roadmap, sales tax electronic system implementation in August 2024.
  - PFM improvements and SFMIS integration summarized above; full payroll integration as of June 2024.
  - Procurement, concessions, and asset management reforms summarized above, including PPP bill submission in August 2024.
- Financial sector governance:
  - CBS safeguards implementation, audited financial statements with clean opinion, IFRS adoption, restored Board and Audit Committee.
  - Strengthened supervision, licensing, and prudential regulations; 5 MMOs licensed covering more than 80 percent of the mobile money market.
- Anti-corruption:
  - Progress under NACS: Code of Conduct for civil servants and ethics training; modernized National Civil Service Commission.
  - Somalia accessed the UN Convention Against Corruption; Parliament ratified African Union Convention and Arab Anti-corruption Convention.
  - Independent Anti-Corruption Commission established but requires strengthened resources, staffing, and capacity.
  - Audit Law enacted in September 2023 and Audit law regulations issued in June 2024.
  - In February 2024, submission to Parliament of the UNTOC and its protocols for ratification.
- Market regulation and extractives:
  - Telecommunications Act (2017), National Communication Agency, licensing published.
  - Petroleum Act (2020), National Petroleum Authority established, PSA model approved November 2021, PFM natural resource revenue regulations May 2022, revised tender protocol November 2022, Extractive Industries Fiscal Regime Law enacted June 2023.
- AML/CFT:
  - AML/CFT Act passed in 2016; Financial Reporting Center established.
  - National AML/CFT Taskforce operational since February 2021; NRA finalized and published.

*Source: Annex I. Implementation of IMF Recommendations.*

### 2022. More recent reforms include: (1) publication of the NRA action plan, currently being

### 1somea2024002-print-pdf - 2022. More recent reforms include: (1) publication of the NRA action plan, currently being

### AML/CFT reforms and related infrastructure
- Recent reforms and actions:
  - Publication of the NRA action plan, currently being implemented, with improvements to coordination, capacity, and targeted financial sanctions.
  - Enactment of the Targeted Financial Sanctions Law in March 2023 and issuance of the corresponding regulations in July 2023.
  - Publication of the List of Financial Sanctions Targets (April 2024), which was expanded further in July 2024.
  - CBS guidance on Know-Your-Customer and customer due diligence risk-based approach and large cash transactions and suspicious transactions reporting for commercial banks in July 2023.
  - NAMLC guideline on mobile money transaction limits in July 2023, amended in September 2024 to expand coverage to mobile wallets.
  - Launch of the national digital ID in September 2023 expected to improve know-your-customer requirements.
  - As part of the 2023 ECF arrangement, amendments to the AML/CFT Law were submitted to Parliament in March 2024.
- Identified gaps requiring further improvement:
  - Preventive measures.
  - Entity transparency.
  - Criminal justice.
  - International cooperation.

### Data adequacy, dissemination, and statistics (as of August 2024)
- Somalia participates in the Enhanced General Data Dissemination System (e-GDDS) and publishes data on its National Summary Data Page since June 2022.
- Key reported observation and reporting dates and frequencies (selected entries preserved as presented):
  - Exchange Rates: Date of Latest Observation 24-Jun; Date Received 24-Aug; Frequency Q; Expected Frequency Q; Expected Timeliness D 30 ... 30
  - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation 24-Jul; Date Received 24-Sep; Frequency M; Expected Frequency M; Expected Timeliness M ... 1M ...
  - Reserve/Base Money: Date of Latest Observation 24-Jun; Date Received 24-Aug; Frequency M; Expected Frequency M; Expected Timeliness 30 2M 90
  - Broad Money: Date of Latest Observation 24-Jun; Date Received 24-Aug; Frequency M; Expected Frequency M; Expected Timeliness M 30 1Q 90
  - Central Bank Balance Sheet: Date of Latest Observation 24-Jul; Date Received 24-Sep; Frequency M; Expected Frequency M; Expected Timeliness M 30 2M 90
  - Consolidated Balance Sheet of the Banking System: Date of Latest Observation 24-Jun; Date Received 24-Aug; Frequency Q; Expected Frequency Q; Expected Timeliness M 30 1Q 90
  - Consumer Price Index: Date of Latest Observation 24-Aug; Date Received 24-Sep; Frequency M; Expected Frequency M; Expected Timeliness M 30 2M 30
  - GDP/GNP: Date of Latest Observation 23-Dec; Date Received 24-Jun; Frequency A; Expected Frequency A; Expected Timeliness Q 365 1Q 180
  - Gross External Debt: Date of Latest Observation 24-Aug; Date Received 24-Aug; Frequency M; Expected Frequency M; Expected Timeliness Q ... 2Q ...
- Notes on frequency/timeliness codes preserved as presented (D, W, M, Q, A, SA, I, NA, NLT) and references to SDDS/e-GDDS expectations.

### SDRs: Somalia’s financial position vis-à-vis the IMF and domestic distribution across FGS and CBS
- Financial position of Somalia vis-a-vis the IMF (Dec-20, Dec-21, Dec-22, Dec-23) — selected line items (In millions of SDRs):
  - Total assets: 199.1 | 306.0 | 294.5 | 337.1
  - Quota: 163.4 | 163.4 | 163.4 | 163.4
  - SDR holdings: 35.7 | 142.6 | 131.1 | 173.7
  - Total liabilities 1/: 471.5 | 628.1 | 649.0 | 442.6
  - IMF holdings: 203.0 | 203.0 | 203.0 | 163.4
  - IMF borrowing: 217.9 | 217.9 | 238.9 | 72.0
  - SDR allocations: 50.6 | 207.2 | 207.2 | 207.2
  - Total SDR assets minus total SDR liabilities: -272.4 | -322.1 | -354.5 | -105.5
  - Total SDR holdings minus SDR allocation: -15.0 | -64.6 | -76.1 | -33.5
- Domestic distribution to the CBS (Dec-20 to Dec-23) — selected line items (In millions of SDRs):
  - Total assets: 199.1 | 263.2 | 284.1 | 291.1
  - Quota: 163.4 | 163.4 | 163.4 | 163.4
  - SDR holdings: 35.7 | 99.8 | 120.7 | 127.7
  - Total liabilities 1/: 471.5 | 535.3 | 556.3 | 319.9
  - IMF holdings: 203.0 | 203.0 | 203.0 | 163.4
  - IMF borrowing: 217.9 | 217.9 | 238.9 | 42.0
  - SDR allocations: 50.6 | 114.5 | 114.5 | 114.5
  - Total SDR assets minus total SDR liabilities: -272.4 | -272.1 | -272.2 | -28.8
  - Total SDR holdings minus SDR allocation: -15.0 | -14.7 | 6.3 | 13.3
- Domestic distribution to the FGS (Dec-20 to Dec-23) — selected line items (In millions of SDRs):
  - Total assets: 0.0 | 42.8 | 10.4 | 46.0
  - SDR holdings: 0.0 | 42.8 | 10.4 | 46.0
  - Total IMF liabilities: 0.0 | 92.8 | 92.8 | 122.8
  - IMF borrowing: 0.0 | 0.0 | 0.0 | 30.0
  - SDR allocations: 0.0 | 92.8 | 92.8 | 92.8
  - Total SDR assets minus total SDR liabilities: 0.0 | -50.0 | -82.4 | -76.8
  - Total SDR holdings minus SDR allocation: 0.0 | -50.0 | -82.4 | -46.8
- Memorandum items:
  - FGS promissory note to CBS in SDR millions: 272.5 | 272.5 | 273.0 | 29.7
  - Balance on FGS SDR allocation in SDR millions: 0.0 | 42.8 | 10.4 | 15.9
  - SDR/USD exchange rate: 1.4 | 1.4 | 1.4 | 1.3
- Note on promissory note: initial stock of the 2018 promissory note was SDR 272.2 million, corresponding to the pre-HIPC Decision Point arrears (SDR 243.4 million) and SDR 28.9 million difference described in source.

### 2021 General SDR Allocation: disbursements, sales, charges, and balances (selected entries)
- SDR Allocation Aug-21: Total SDR conversion MoF/CBS/Total — 92,776,683 | 63,834,868 | 156,611,551
- Redistribution from the SCA-1 account Aug-21: 2,306,128
- Sales and operations:
  - Sale 1 Jun-21: -10,000,000
  - Sale 2 Aug-21: -5,430,000
  - Sale 3 Sep-21: -36,555,000
  - Interest payment to the CBS: -264,397
  - SDR net charges: -7,786
- Balance 2021 Dec-21: 42,825,628 | 63,834,868 | 106,660,496 | 42,825,628
- 2022 sales and operations (selected):
  - Sale 3 Jan-22: -2,300,000
  - Sale 4 Jan-22: -23,240,000
  - Sale 5 Jul-22: -6,170,000
  - GRA charges: -122,351
  - SDR net charges: -524,641
- Balance (2022) Dec-22: 10,468,636 | 63,834,868 | 74,303,504 | 10,393,419 | 81,345 | -6,128
- 2023 items (selected):
  - SDR net charges: -2,638,710
  - Purchase of SDR: 1,218,890
  - HIPC windfall: 7,000,000
- Balance (2023) Dec-23: 16,048,816 | 63,834,868 | 79,883,684 | 15,973,599 | 81,345 | -6,128
- Source for this table: IMF Staff estimates

### Disbursements from EFF/ECF and HIPC debt relief (2020–2023) — selected program details and uses (In millions of SDRs)
- 2020 ECF/EFF program:
  - Program approval Mar-2025 (entry shows "0.4 MoF") and table notes: The Extended Fund Facility (EFF) and Extended Credit Facility (ECF) disbursement of SDR 250.4 million was used to repay the SDR 243.4 million bridge loan from Italy that had been used to clear arrears to the IMF and the remainder (SDR 7 million) was kept as a deposit at the CBS.
  - First review Dec-20: 7.0 CBS — Disbursement used for reserve accumulation
  - Combined second and third reviews Jun-21: 14.0 CBS — Disbursement used for reserve accumulation
  - Fourth review Dec-22: 7.0 CBS — Disbursement used for reserve accumulation
  - Fifth review May-23: 7.0 CBS — Disbursement used for reserve accumulation
  - Sixth and final review Dec-23: 7.0 CBS — Disbursement used for reserve accumulation
- HIPC debt relief Dec-23: 250.4 MoF — The IMF provided HIPC and beyond HIPC debt relief for SDR 250.4 million used for early repayment of the IMF loans to Somalia disbursed in March 2020 totaling SDR 250.4 million. The “windfall” from HIPC debt relief corresponds to the SDR 7 million from the March 2020 disbursement that had been kept as deposits at the CBS and that now do not need to be serviced.
- 2023 ECF program approval Dec-23: 30.0 MoF — Budget support
- Memorandum items:
  - Total disbursements to the CBS from the 2020 ECF: 42.0 CBS
  - Total disbursements to the MoF from the 2023 ECF: 30.0 MoF
- Source: IMF Staff estimates

### Net SDR charges and debt servicing responsibilities
- Somalia’s total SDR holdings minus the SDR allocation is negative (- SDR 33.5 million at end-2023), generating net SDR charges every quarter.
- Allocation of responsibility and operational procedures:
  - MoF responsibilities:
    - Based on the September 1, 2021 MOU between the MoF and the CBS, the MoF should cover the net SDR charges associated with the use of the MoF share of the 2021 IMF General SDR allocation.
    - Based on the December 31, 2018 Promissory Note between the MoF and the CBS, the MoF should cover the net SDR charges associated with the remaining post-HIPC balance of the promissory note of about SDR 28.9 million.
    - It is advised that the MoF treat the net SDR charges similar to other external interest payments with a corresponding budget allocation and disbursement.
  - Operational procedures agreed between the CBS and the MoF:
    - (i) the IMF Finance department debits Somalia’s SDR account for the corresponding quarter’s net SDR charges;
    - (ii) subsequently, the CBS notifies the MoF about the IMF transaction and sends a request to the MoF to purchase the SDRs;
    - (iii) the MoF responds to the CBS with an approval to purchase SDRs from the IMF, using its US$ deposits at the CBS.
  - Servicing of ECF loan debt service:
    - Disbursements under the ECF approved in March 2020 (that concluded in December 2023) were used for CBS reserve accumulation and therefore the CBS is responsible for the corresponding debt servicing if used.
    - Disbursements under the new ECF approved in December 2023 are being used for budget support and therefore the MoF is responsible for the corresponding debt servicing, in line with the MOU between the CBS and MoF from November 19, 2023.
    - MoF should treat ECF debt servicing the same as other external interest payments, with a corresponding budget allocation and disbursement.
- Current practice: The MoF pays the net SDR charges due to the IMF by Somalia as a whole.

### Letter of Intent and program request (November 14, 2024)
- Context and commitments:
  - Somalia requests IMF Executive Board approval of the completion of the 2nd review of the program and disbursement of SDR 7 .5 million (about 4.56 percent of quota).
  - The authorities met all quantitative performance criteria (QPCs) and indicative targets (ITs) for end-June 2024.
  - Planned use of the 2nd review disbursement: budget support.
- Program framework and objectives:
  - 3-year Extended Credit Facility (ECF) arrangement approved in December 2023.
  - Policy priorities: maintain macroeconomic stability, increase domestic revenues, strengthen public financial management, promote financial deepening and financial inclusion, improve the business environment and governance, and enhance statistics.
  - Additional reforms: strengthen capacity for public debt management and debt risk assessments; strengthen public investment management as FGS scales up quality investment projects.
  - Plan to implement a currency board arrangement as the new monetary and exchange rate policy framework in the context of currency reform to reintroduce the Somali shilling as legal tender.
- Monitoring and transparency:
  - The attached MEFP and TMU set out policies and deadlines; FGS will provide required information per TMU.
  - The FGS authorizes the IMF to publish the letter, MEFP, TMU, and related staff report in accordance with the IMF’s transparency policy.
- Signatories:
  - /s/ Bihi Iman Egeh, Minister of Finance of Somalia
  - /s/ Abdirahman M. Abdullahi, Governor of the Central Bank of Somalia

*Source: 1somea2024002-print-pdf - 2022. More recent reforms include: (1) publication of the NRA action plan, currently being*

### 1.      We have made great strides in rebuilding institutions and policy-making capacity with

### 1.      We have made great strides in rebuilding institutions and policy-making capacity with

### Reform progress and institutional rebuilding
- Wide-ranging reforms under National Development Plans (NDP8 and NDP9) have helped rebuild key institutions, including economic institutions, and laid the foundations for macroeconomic stability and growth.
- Continued commitment to macroeconomic stability, reform, and deeper political cooperation at the federal and regional levels is emphasized.
- Timely financing and capacity development support from development partners is deemed essential for successful implementation of the reform strategy.

### Poverty, growth, and resilience
- In 2022, an estimated 54 percent of the population was living below the poverty line of US$ 2 per day based on the 2022 Somalia Integrated Household Budget Survey.
- Growth is currently insufficient to reduce poverty and address large social needs (health, education, job creation).
- Somalia is highly vulnerable to climate shocks that aggravate food insecurity and hurt growth.
- Large, multi-year investments in human and physical capital are needed to improve resilience and lead to higher and more inclusive growth.

### Food insecurity and humanitarian response
- Food insecurity remains critical due to a combination of factors including climate shocks.
- The government is coordinating with the UN system on delivery of humanitarian assistance.
- The Baxnaano cash transfer program provides a safety net for 50,000 households.

### Security and stabilization
- The government has stepped up its fight against terrorism to improve security across the country.
- In December 2023, the UN Security Council lifted the arms embargo on the FGS, which had been in place since 1992.
- Since mid-2022, the government scaled up military, ideological, and financial campaigns against Al-Shabab.
- Somali military gains in central regions have facilitated delivery of humanitarian assistance, with SODMA providing emergency response.
- Stabilization efforts include delivery of health and education services and initial establishment of local governance.
- The Somali National Armed Forces are gradually taking over security responsibilities from ATMIS, which is expected to gradually withdraw its forces by December 2024.
- Somalia is engaging with the United Nations, African Union, and key partners to secure support for a new African Union Support and Stabilization Mission in Somalia (AUSSOM) starting in early 2025.
- The ATMIS transition, military scale-up, and stabilization policies for liberated areas are generating pressures on government finances.

### Recent economic activity and prices
- Real GDP growth was 4.2 percent in 2023, compared to 2.7 percent in 2022.
- Crops and livestock have recovered, though remain affected by recent severe flooding.
- Remittances growth has strengthened.
- Inflation remains at 5.3 percent in September 2024, compared to 6.6. percent in December 2023.
- Food and fuel prices have been moderating.

### Regional integration
- Somalia joined the East African Community (EAC) as its eighth Partner State in March 2024.
- A roadmap for Somalia’s full integration into the EAC has been developed.
- Full integration, including adoption of a customs union and common market, can span several years as Somalia builds capacity and aligns institutional and policy frameworks with the EAC.

### Fiscal performance and outlook (2024)
- Domestic revenues have performed strongly in 2024; expenditures have been within the budget.
- Total expenditure has been slightly below budget expectations, and a small overall deficit is expected for the year.
- Domestic revenues in 2024 are expected to be larger than the cost of compensation of employees, as was the case in 2023.
- Revenue overperformance and budget support grants will allow maintenance of a cash balance to partially address liquidity needs in early 2025.

### Revenue administration reforms and tax measures
- Medium-Term Revenue Roadmap (MTRR) for 2024-2027 finalized on June 29, 2024 (structural benchmark (SB) #1, met).
  - MTRR quantitative targets: raise revenue to GDP by 0.3 percentage points every year and cover the operational expenditure of the government by 2027.
  - Priorities: continue revenue mobilization, improve tax administration capacity, and advance fiscal (tax) harmonization and EAC integration.
- Customs modernization:
  - Enactment of the ad valorem tariff schedule in June 2022.
  - Issuance of customs regulations on valuation and declarations in September 2022.
  - SOMCAS rolled out to ports and airports; operationalized in Mogadishu port and airport as of early October 2023; implemented in Kismayo port and airport in Jubaland State.
- Income Tax bill finalized and submitted to Parliament on July 9, 2024 (SB#2, implemented with delay).
- New spectrum fees issued in September 2022; revenue collection from the spectrum fee schedule is expected to be US$ 6 million per year for the next 10 years.
- New turnover tax: 2,597 newly registered taxpayers commenced paying taxes in July 2023.
- Reporting on tax exemptions: annual report published as part of the 2023 budget package; first quarterly report for 2022Q4 published in January 2023; regular quarterly reports have followed.
- Digitalization:
  - New IT system for electronic invoices and receipts and tracking payments of rental income tax for all rental properties in Mogadishu.
  - Mobile app—Somalia Road Tax—allows users to manage and pay road tax bills and view payment receipts.
- Extension of sales tax to services included in the 2024 Appropriations Law (telecom, electricity, TV cable providers); related regulations issued.
- Sales tax electronic system implemented in August 2024; collects sales tax directly from consumers paying into merchant mobile money/mobile wallet accounts and transmits revenues automatically to the Treasury Single Account.
- Revenue Administration Law regulation issued April 2024 covering enforcement issues.
- Rollout of Point of Sales (POS) machines at restaurants and hotels in Mogadishu transmitting sales data to tax offices in real time.
- New rounds of tax audits undertaken annually since 2020 to improve tax return quality.
- Personal income tax withholding at source implemented for workers in the health and education sector.
- New regulation establishing civil penalties for violation of revenue laws issued on September 14, 2024.
- Public awareness events held to improve taxpayers’ understanding of the 2019 Revenue Administration Law.
- Capacity of the revenue administration has been strengthened.

### Public financial management (PFM) reforms
- Reporting and transparency:
  - Annual financial statements of the Federal Government of Somalia (FGS) have been regularly published since 2019.
  - Aggregated budget (FGS, five FMS, and Banaadir Regional Administration) published first as part of the 2021 Budget Policy Framework and annually since.
  - Monthly consolidation reports of fiscal outturns of the FGS and five FMS published on the MoF website since January 2021.
  - Additional disclosures at the FGS level, including a memorandum annex on SDR holdings of the MoF.
- PFM Act regulations on debt, public investment, and natural resource revenue management issued in May 2022.
- PPP bill submitted to Parliament on August 12, 2024 (SB#5, implemented with delay); establishes process for assessment of PPP projects, Technical Unit within MoF, and requirement for IMC review and approval for PPPs.
- Expenditure controls:
  - SFMIS functionality fully operationalized to control commitments within allocations and warrants, guided by monthly cash forecasts.
  - Parliament resolution in September 2024 mandates government institutions developing new legislation to get MoF clearance if proposed legislation has fiscal implications.
- Payroll integration:
  - Pay and Grade policy and roadmap approved by Cabinet on December 1, 2022.
  - Measures to ensure payroll integrity: (1) October 2023 SFMIS configuration permits only MoF to change payroll entries with financial implications; (2) MoF financial clearance authority on compensation included in 2023 Appropriations Law and 2024 Appropriations Bill approved by Cabinet in October 2023; (3) full integration of all compensation into single payroll in SFMIS (SB#3, met).
- Streamlining business processes: roadmap to expand invoice tracking to all goods and services approved on February 28, 2024 and being implemented.
- Public procurement: implementation of the Public Procurement Law and regulations, Prime Minister guidelines on emergency procurement issued July 2023, standard operating procedures for IMCC approved, Prime Ministerial decree issued October 2023 reinforcing due process, cabinet resolution on August 21, 2024 reinforcing transparency in management of contracts and concessions.
- Public lands and real estate: PFM Regulations amended in September 2023 to implement PFM Act provisions on public property; Asset Management Guidelines issued.

### Debt management
- Debt Management Unit (DMU) upgraded its debt recording management system with the Commonwealth Meridian System.
- DMU has been publishing consecutive quarterly public debt reports since 2020Q4.
- Debt reconciliation exercise carried out in 2023 in preparation for the HIPC Completion Point.
- Procedures for initiating loan negotiations and entering into loan agreements have been more fully articulated and disseminated.
- On July 15, 2024, a decree and regulation on debt policy were issued articulating key parameters for debt policy; establishing procedures for new borrowing and sovereign guarantees; and amending PFM regulations to define “other financial liabilities” considered guarantees as per Article 37 (6) of the PFM Act, in line with IMF staff recommendations (SB#4, implemented with delay).

### Federalism and constitutional amendments
- March 2023 National Consultative Council convened leaders of the FGS, four out of five FMS, and the Mayor of Mogadishu.
- Agreements reached on creating a National Revenue Authority, assignment of revenue responsibilities across levels of government, and the revenue pool to be shared between the FGS and FMS.
- July 2023 agreement on distribution of external budget support.
- March 2024 Parliament ratified amendments to the first four chapters of the Provisional Constitution.

### Central Bank of Somalia (CBS) — financial stability, supervision, and governance
- National Payment System (NPS) launched in 2021; transactions through NPS increasing.
- IBAN account standardization launched March 27, 2023 to improve cross-border payments and reduce operational risks.
- Gargaara program with World Bank support continues to support access to financing for micro, small, and medium-sized enterprises.
- CBS joined the Alliance for Financial Inclusion (AFI) in February 2024.
- Guidance for Islamic bank financial reporting and Shariah bank governance framework issued in 2020.
- CBS joined the Islamic Financial Services Board (IFSB) in January 2024.
- Banking regulations on capital and liquidity requirements issued in July 2023 and became effective in January 2024; capital adequacy regulation incorporates risk weighting of exposures according to Basel III framework in a proportionate manner considering Islamic financing; liquidity regulation clarifies and simplifies the liquidity coverage ratio (LCR) requirement in addition to qualitative risk management requirements.
- As of September 2024, five mobile money operators have been granted licenses.
- Mobile money regulations were issued; payment system and mobile money oversight division established; regulation manual drafted.
- Capacity in financial supervision improving; move towards risk-based prudential supervision.
- In July 2024, the CBS adopted an action plan to improve the quality of data submitted by commercial banks and communicated the action plan to commercial banks (SB#6, met).

### CBS institutional strengthening and safeguards
- Performance criteria on net international reserves (NIR) has been consistently met.
- Function-based organizational structure adopted; performance management system established.
- Most recommendations from the March 2020 safeguards assessment have been implemented.
- Financial reporting transparency improved with implementation of International Financial Reporting Standards.
- Governance bodies—the Board and the Audit Committee—have been restored and exercise oversight responsibilities.
- 2023 audited financial statements published in June 2024 with a clean auditor opinion.
- Period-end closing procedures established in January 2023.
- Most 2024 Safeguards recommendations addressed, including internal controls and expanded disclosures to CBS financial statements.
- CBS joined the World Bank’s Reserve Advisory and Management Partnership (RAMP) in October 2024.

*Source: 1somea2024002-print-pdf - 1.      We have made great strides in rebuilding institutions and policy-making capacity with*

### 14.      Some important steps have been taken on AML/CFT. The National AML/CFT Taskforce

### Some important steps have been taken on AML/CFT.

### AML/CFT progress and related infrastructure
- National AML/CFT Taskforce operational since February 2021 to support the National Anti-Money Laundering Committee (NAMLC).
- National Risk Assessment (NRA) on ML/FT finalized and published in 2022.
- NRA Action Plan published in February 2023.
- Targeted Financial Sanctions Law (TFSL) enacted in March 2023; related regulations approved in July 2023.
- List of Financial Sanctions Targets published in April 2024 and expanded in July 2024.
- Key infrastructure and IT systems acquired to support the Financial Reporting Center’s capacity to review and assess suspicious transactions.
- Capacity building through outreach and training to improve financial sector integrity.
- CBS guidance on Know-Your-Customer and customer due diligence risk-based approach and large cash transactions and suspicious transactions reporting for commercial banks issued in July 2023.
- NAMLC guideline on mobile money transaction limits issued in July 2023 and expanded in September 2024 to include mobile wallets.
- Amendments to the 2016 AML/CFT Law submitted to Parliament on March 30, 2024 as part of preparations for the MENA-FATF Mutual Evaluation Assessment.

### Governance, anti-corruption, and legal accession
- CBS and National Communication Authority (NCA) published outcomes of licensing applications for Mobile Network Operators and Mobile Money Operators on their websites to enhance transparency in regulatory processes.
- Acceded to the UN Convention Against Corruption (UNCAC) in August 2021 and to the Arab Anti-Corruption Convention in October 2023; deposited the African Union Convention on Preventing and Combating Corruption.
- United Nations Convention Against Transnational Organized Crime (UNTOC) and its protocols submitted to Parliament on February 4, 2024 for ratification.
- National Anti-Corruption Strategy (NACS) published in 2019 with outreach and ethics training to public sector employees.

### Audit law and audit institution strengthening
- Audit Law enacted in September 2023 to establish legal groundwork for a federal audit system.
- Law strengthens independent oversight of public resources at federal and state levels, outlines checks and balances for appointing/dismissing the Auditor General, and separates responsibilities for special audits of grant transfers.
- Corresponding regulations issued in June 2024 to align Office of the Auditor General (OAGS) with international standards and reinforce autonomy in staffing, operational, and financial management; delineates responsibilities between OAGS and FMS auditors general.

### Natural resources, sectoral legislation, and reforms
- Model Oil and Gas Production Sharing Agreement (PSA) approved by the IMCC in November 2021.
- PFM regulations on natural resource revenue management issued in May 2022.
- Revised tender protocol approved by the IMCC in November 2022.
- Extractive Industries Fiscal Regime Law enacted in June 2023.
- Somali Standards and Quality Control Bill passed and Somali Bureau of Standards established in 2020.
- “One-stop-shop” to e-register business for integrated tax and business licensing services established.
- Second set of Company Act regulations on minority shareholder protection issued in May 2022.
- Electricity Act enacted in March 2023; Electricity Service Provider (ESP) Licensing Regulations and ESP Tariff Regulations approved.
- Additional legislation passed by Parliament in March 2023: Data Protection Law, Digital ID System Law, Investment and Investor Protection Act, Federal Law on Fisheries.
- New Pension Law for Civil Servants enacted in April 2024.

### Digital ID, social protection, and human capital
- National digital ID launched in September 2023.
- As of August 2024, 60 thousand individuals enrolled in the National Identification and Registration Agency (NIRA).
- Digital ID intended to support targeted social protection programs and improve KYC requirements for AML/CFT.
- FGS and FMS joint agreements: Ministers of Education adopted roles/responsibilities on curriculum and examinations; Ministers of Health adopted a joint national health sector strategy.
- National Unified Social Registry (USR) established; nationwide survey targeting approximately 1.9 million households.
- Implementation of social safety net scheme—Baxnaano—with World Bank support and use of World Food Program systems.

### Statistics and data transparency
- Somalia National Bureau of Statistics (SNBS) has published Somalia Facts and Figures annually since 2018.
- National accounts published annually; consumer price index published monthly.
- 2022 Somalia Integrated Household Budget Survey (SIHBS), first since 1985, published in February 2023 and used to rebase GDP and produce a national CPI to be published starting in January 2025.
- Continued implementation of the enhanced General Data Dissemination System (e-GDDS) framework.

### Outlook and risks
- Real GDP growth forecast for 2024: 4 percent.
- Inflation expected to decline to 4.5 percent (eop) in 2024.
- Growth expected to increase to 4.5 percent by 2029.
- Key near-term risks: climate shocks (drought, floods, and related impact on food insecurity), security risks, lower than anticipated global growth, additional pressures on international food and energy prices, and shortfalls or delays in disbursement of budget support financing.
- Contingency measures if risks materialize: absorb revenue shortfalls through fiscal discipline, draw on available cash buffers, apply sequestration rule that prioritizes critical expenditure, and seek additional financing from development partners.

### Economic and financial policy framework under the ECF-supported program
- Reform priorities:
  - (i) increasing domestic revenues;
  - (ii) strengthening PFM (legal and regulatory framework, internal and external audit, expenditure controls, cash management, accounting and reporting, debt management, and public investment management);
  - (iii) promoting financial deepening and financial inclusion, including the currency reform and currency board arrangement;
  - (iv) improving the business environment and governance (including AML/CFT);
  - (v) enhancing statistics.
- Quantitative performance criteria and indicative targets include:
  - floor for domestic revenue;
  - ceiling on recurrent operating expenditures;
  - floor on the cash-based fiscal balance;
  - no new external arrears;
  - no new accumulation of domestic arrears;
  - no new accumulation of non-concessional external debt;
  - ceiling on new domestic debt;
  - floor on the net international reserves of the CBS.
- Structural benchmarks involve revenue administration, public financial management, financial stability, and governance and AML/CFT.
- Program intentions: not to impose or intensify restrictions on current international payments/transfers, not to introduce or intensify import restrictions for balance of payments purposes, and not to enter into bilateral payments agreements inconsistent with Article VIII of the IMF’s Articles of Agreement.
- Expected outcomes by the conclusion of the arrangement: improved efficiency and transparency of fiscal processes; increased domestic revenues and expenditures; strengthened debt management and public investment management capacity; progress on currency reform and currency board arrangement; enhanced statistics and governance across macro-critical sectors.

### Fiscal policy stance and targets
- Medium-term approach:
  - Anchor policy in a medium-term fiscal framework (MTFF).
  - Rely solely on grants and concessional loans for external financing to preserve debt sustainability.
  - Maintain overall fiscal deficits of up to 3.5 percent of GDP financed with concessional loans, of which at a minimum 1.5 percent of GDP will come from multilateral creditors that provide highly concessional financing terms as well as capacity development support.
  - Periodic review of borrowing capacity as revenue, debt management, and public investment management capacities increase.
- 2025 budget expectations:
  - small overall fiscal deficit of 0.2 percent of GDP.
  - Implementation of measures in the MTRR will raise domestic revenues to at least 3.3 percent of GDP.
  - Domestic revenue ratio to GDP to improve by 0.3 percentage points in 2025 compared to 2024.
- Objective to raise domestic revenue to fully cover operational expenditure by 2027.

### Key revenue mobilization measures (MTRR 2024–2027)
- Customs modernization:
  - Complete ad valorem customs reform.
  - Fully discontinue use of the Port Customs Management Information System (PCMIS) by end-June 2025 (proposed SB#10) to ensure sustained end-to-end use of SOMCAS in Mogadishu seaport and airport.
  - Begin application of ad valorem tariffs relying on invoice values once stakeholders gain sufficient SOMCAS experience; maintain common valuation table for minimum values.
  - Advance customs reform in remaining ports when political conditions allow.
  - Align customs modernization strategy with EAC membership requirements.
- Modern income tax law:
  - Once enacted, move swiftly to implementation to streamline definitions of taxable income and deductions in both FGS and FMSs; expected to increase income tax collection over the medium-term.
- Revenue mobilization from large businesses, particularly the telecom sector:
  - Speed up revenue mobilization from sectors with significant revenue potential, including telecom.
  - Bring effective tax rates on the telecom sector up to levels comparable to peers and other countries in the region.
  - Leverage expansion in tax registrations tied to the sales tax electronic system.
- Other revenue administration measures:
  - Develop Integrated Tax Administration System (ITAS) to enable collection/use of third-party data, enhance tax audits, automate collection, and improve inland tax administration effectiveness.
  - Develop and rollout a non-tax revenue portal to channel all fees charged by different MDAs to the Treasury Single Account.
  - Strengthen tax audits by implementing the new audit manual based on audits since 2020.

### Public financial management (PFM) strengthening actions
- Streamlining business processes:
  - Streamline budget execution and Treasury management to enhance financial controls and reporting.
  - Accelerate automation of cash planning and revenue management through SFMIS by eliminating paper-based parallel processes and utilizing interfaces with SOMCAS and ITAS.
  - Update PFM regulations relating to digital signatures for purchase order to payment process and implement digital signatures in SFMIS by end-June 2025 (SB#8), including training of MDAs.
- Debt management:
  - Publish an Annual Debt Management Report (ADMR) for FY2024 by end-April 2025 in line with IMF TA recommendations (proposed SB#11) to strengthen analytical capacity, enhance debt transparency, and provide stakeholder assessment of debt management.
- Fiscal transparency and accountability:
  - Amend PFM Regulations to require costing of the NDP in annual and supplementary budgets.
  - Coordinate with Banaadir to develop their regular fiscal reporting process and ensure participation in aggregated reporting to expand coverage of general government fiscal reports.
- Public investment management and PPPs:
  - Develop capacity in public investment management (project appraisal and selection) to ensure quality and affordable projects while ensuring fiscal sustainability.
  - Develop legal and fiscal institutional framework for PPPs to promote investment and manage fiscal risks.
  - Key elements to contain PPP fiscal risks: (i) sound PPP framework; (ii) controlling costs through a gateway process managed by the MoF; (iii) disclosure of costs and risks.
  - PPP bill submitted to Parliament in August 2024; committed to edits to ensure consistency with budget process, update affordability and project selection criteria, and assess PPPs alongside other investment projects during strategic allocation phase.
- Public procurement:
  - Continue to develop open and transparent public procurement via implementation of the Public Procurement Law and regulations.
  - Strengthen MDA capacity through training and sensitization on procurement laws and guidelines.
- Public lands and real estate:
  - Implement PFM Regulations on public property and Asset Management Guidelines to promote prudent use of public lands and real estate.

### Expenditure policy implementation and fiscal risk management
- Develop a roadmap to implement Pay and Grade policies including:
  - plan and timeline for strategy to align salaries of temporary workers with pay scale of permanent workers;
  - plan and timeline for costing exercise to understand fiscal implications of shifting permanent and temporary workers to a new pay scale (SB#7, with a reset target date to end-February 2025 to allow sufficient time for technical assistance support).
- Civil Service Pension Act application to be preceded by a fiscal impact assessment informed by planned civil service pay and grade reform and information about number and age structure of dependents eligible for survivor benefits.

*Source: 1somea2024002-print-pdf - 14.      Some important steps have been taken on AML/CFT.*

### 31.      In the context of the Constitutional review process, we will seek to strengthen the links

### 1somea2024002-print-pdf - 31.      In the context of the Constitutional review process, we will seek to strengthen the links

### Constitutional fiscal provisions
- Seek to strengthen links between the Constitution’s fiscal provisions and the primary legislation and policy agreements established over the past decade.
- Seek to ensure consistency between the Fiscal Chapter of the Constitution and other chapters in the Constitution with fiscal provisions.

### Debt restructuring and HIPC process
- Continued good faith efforts to reach agreement with pending creditors to restructure Somalia’s HIPC-eligible external public debt.
- Achievements and milestones:
  - HIPC Completion Point reached in December 2023.
  - Paris Club agreed upon a HIPC Initiative exit debt treatment for Somalia on March 13, 2024.
  - Paris Club creditors agreed to provide beyond-HIPC debt relief; 5 Paris Club members have already signed the debt cancelation agreement.
  - Agreements concluded in 2024 with the Islamic Development Bank and OPEC Fund for International Development.
- Ongoing engagement with pending multilateral and bilateral creditors, and efforts with pending non-Paris Club bilateral creditors have gained speed.

### Extractive industries legal framework and PSAs
- Commit to finalize and implement a harmonized legal framework for the extractive industries.
- Key deliverables and deadlines:
  - Publish Extractive Industries Fiscal Regime Law (EIFRL) regulations by end-January 2025 (in line with IMF recommendations; proposed SB#13).
  - Publish a new regulation for the Petroleum Act clarifying publication standards for all production sharing agreements (PSAs), including timeframe and coverage, by end-March 2025 (proposed SB#14, end-March 2025).
  - Amend the regulation harmonizing the Petroleum and Procurement Acts to require that all PSAs (direct negotiation and licensing round) be submitted to IMCC for review and approval by end-December 2024 (proposed SB#15).
  - Finalize the regulations for the Petroleum Act.
- Commitment on PSAs:
  - No signing of new PSAs until the legal framework is completed (EIFRL regulations; Petroleum Act regulations on PSA publication standards; amendment harmonizing Petroleum and Procurement Acts to cement IMCC review and approval of all PSAs; Petroleum Act regulations).
  - Exception: PSAs negotiated under the existing specific defense and security framework agreement approved by Parliament in February 2024 involving national security—these would be submitted to IMCC for review and approval (proposed continuous SB#16 until the legal framework is issued).
  - Any direct negotiations will be limited and informed by price discovery through previous competitive licensing rounds.

### Monetary and financial sector reforms (CBS, payments, currency reform)
- Strengthen CBS institutional capacity and support financial deepening:
  - Bills for the revised Financial Institutions, National Payments System, and Islamic Insurance submitted to Parliament.
  - Developing a National QR code and National SWITCH to support the national payment system.
  - Strengthen staffing and capacity of the CBS Licensing and Supervision Department.
  - Continue addressing remaining recommendations of the 2024 IMF safeguards assessment, including cyber security and business continuity, and the CBS Law.
  - Issue detailed instructions to capital adequacy (CAR) and liquidity coverage ratios (LCR) templates reported by banks by end-July 2025 (proposed SB#12).
- Currency reform and currency board arrangement:
  - Plan to adopt a currency board arrangement as the monetary and exchange rate framework with IMF technical assistance.
  - Reintroduce the Somalia shilling as legal tender; maintain a dual currency regime with the U.S. dollar.
  - Submit amendments to the CBS Law to Parliament, including provisions to cover the currency board arrangement, in line with IMF safeguards recommendations (SB#9, amended and with a reset target date of end-December 2025).
  - Need to secure gross international reserves required to backstop the new currency, including by catalyzing donor assistance.
  - Commitments to sustain credibility of the currency board once implemented: (i) ensure fiscal sustainability; (ii) ensure CBS operational independence and prevent deficit financing of the government; (iii) strengthen CBS capacity, including the cash management function, and policies to promote transparency; (iv) secure financial stability, develop financial markets, and support capacity building of financial institutions; and (v) improve the quality, frequency, and timeliness of macroeconomic and financial data.
  - Work underway to secure a firm agreement between the FGS and all FMS and to address the funding gap (including discussions with the World Bank). Preparations for introducing a currency board arrangement with IMF CD support have started.

### AML/CFT and remittances
- Continue advancing reforms of the AML/CFT operational and legal framework to comply with international standards and support the flow of remittances into Somalia.
- Continue implementation of the NRA action plan.
- Completed the questionnaires on effectiveness and technical compliance in preparation for the MENA-FATF Mutual Evaluation Assessment.
- Onsite visit of MENA-FATF delayed; MENAFATF will decide scheduling of the onsite visit at the next plenary meeting in November 2024.

### Governance, anti-corruption, climate resilience, and development planning
- Governance and anti-corruption:
  - Strong commitment to improve governance and fight corruption.
  - Steps to review existing laws to ensure compliance with the UNCAC.
  - Strengthen resources of the Independent Anti-Corruption Commission and update the National Anti-Corruption Strategy.
- Climate resilience and development planning:
  - Ministry of Environment and Climate Change launched a Food Security Crisis Plan in December 2023.
  - Developed a National Climate Change Policy.
  - Developing the Centennial Vision 2060 and a new National Transformation Plan (NTP) to succeed the NDP9.
  - Work with development partners to channel aid through the budget and country systems, enhance visibility, and facilitate monitoring and evaluation.
  - Progress towards integration with the customs union and common market of the East African Community and accession to the World Trade Organization.

### Statistics and data improvements
- Expand availability of economic activity and social data:
  - New Business Survey to be finalized by end 2024.
  - Annual establishment survey to be launched in 2025.
  - Agriculture census planned for 2025-2026.
  - New population census expected to begin in 2026 (the first after 40 years).
  - Business survey and subsequent annual survey intended to provide the foundation for deriving GDP by the production approach.

### Program monitoring, quantitative performance criteria, and structural benchmarks
- Program monitoring:
  - Program implementation monitored through quantitative performance criteria, continuous performance criteria (including a continuous performance criterion related to Article VIII commitments), indicative targets (MEFP Table 1) and structural benchmarks (MEFP Table 2).
  - Assessed through semi-annual reviews.
  - Third and fourth reviews of the ECF arrangement based on QPCs and ITs set for end-December 2024 and end-June 2025, respectively.
- Selected deadlines and structural benchmarks (as listed in Table 2):
  - 1: Publish a Tax Policy and Revenue Administration Roadmap approved by the Minister of Finance — End-June 2024 — Status: Met.
  - 2: Submit the Income Tax Bill to Parliament — End-June 2024 — Status: Not met, implemented with delay on July 9, 2024.
  - 3: Ensure full payroll integration of FGS employees in SFMIS by reducing ratio of non-payroll compensation to less than 1 percent — End-June 2024 — Status: Met.
  - 4: (1) Issue a Prime Ministerial Decree on debt policy; (2) amend PFM regulations to define “other financial liabilities” considered guarantees — End-June 2024 — Status: Not met, implemented with delay on July 15, 2024.
  - 5: Submit the PPP Bill to Parliament with adequate fiscal risk management framework — End-June 2024 — Status: Not met, implemented with delay on August 12, 2024.
  - 6: Develop an action plan to improve quality of data submitted by commercial banks and communicate to banks — End-July 2024 — Status: Met.
  - 7: Develop a roadmap to implement the Pay and Grade policy — End-December 2024 (proposed new target date End-February 2025).
  - 8: (i) Publish updated PFM regulations relating to digital signatures for purchase order to payment process; and (ii) implement digital signatures in SFMIS — End-June 2025.
  - 9: Submit to Parliament amendments to the CBS Law, including to cover the currency board arrangement — End-March 2025 (proposed new target date End-December 2025).
  - 10: Ensure sustained end-to-end use of SOMCAS in the Mogadishu seaport and airport by fully discontinuing use of PCMIS — End-June 2025.
  - 11: Publish an Annual Debt Management Report (ADMR) for FY2024 — End-April 2025.
  - 12: Issue detailed instructions to CAR and LCR templates reported by banks — End-July 2025.
  - 13: Publish regulations for the EIFRL, in line with IMF recommendations — End-January 2025.
  - 14: Publish a new regulation for the Petroleum Act clarifying publication standards for PSAs — End-March 2025.
  - 15: Publish amended regulation harmonizing the Petroleum and Procurement Acts to require IMCC review and approval of all PSAs — End-December 2024.
  - 16: Continuous moratorium on signing new PSAs until legal framework is completed, with exception for PSAs under the February 2024 defense and security framework agreement; Ministry of Petroleum to provide monthly letters to IMF staff confirming no new PSAs have been signed (within 30 days of end of month).
- Additional monitoring and program details:
  - The Technical Memorandum of Understanding (TMU) defines the quantitative targets, indicative targets, and program exchange rates and specifies adjustments (e.g., adjustment of NIR floor under certain CBS operations).
  - Program reviews and test dates: Mar. 2024, Jun. 2024, Dec. 2024, Mar. 2025, Jun. 2025, Sept. 2025 as referenced for reviews and targets.
- Selected program fiscal and reserve references (as presented):
  - Fiscal balance floor for 2024 is in line with authorities' 2024 budget (-US$38 million) and IMF staff forecast (-US$24 million); differences explained by differing assumptions on budget support grants and interest payments.
  - Authorities' 2024 budget included US$185 million in budget support grants (including US$75 million DPF from the World Bank); IMF staff forecast incorporates US$202 million in grants (including US$125 million DPF from the World Bank).
  - Authorities' 2025 budget fiscal balance floor is in line with authorities' 2025 budget (-US$28 million) and IMF staff forecast (-US$158 million); authorities' 2025 budget includes US$170 million in budget support grants, IMF staff forecast incorporates US$37.4 million in grants.
  - TMU: fiscal balance floor would be adjusted downward by any delays or shortfalls in budget support grants as compared to the budget estimate, or if interest payments are higher than the budget estimate.

*Source: IMF*

### 1. The quantitative performance criteria (QPC) and indicative targets (IT) are specified

### 1. The quantitative performance criteria (QPC) and indicative targets (IT) are specified

### QPCs and ITs: scope, timing, and evaluation
- Quantitative targets set on a 12-month rolling basis during program reviews; test dates:
  - QPCs: usually semiannual.
  - ITs: quarterly.
- All quantitative targets evaluated in terms of cumulative flows from the beginning of each calendar year unless otherwise specified.
- QPCs for December 2024 and June 2025, and related ITs for September 2024, March 2025, and September 2025:
  - Floor on Federal Government of Somalia (FGS) domestic revenue;
  - Ceiling on spending on FGS compensation of employees, goods & services, & contingency;
  - Floor on the Central Bank of Somalia’s (CBS) net international reserves (NIR);
  - Ceiling on accumulation of new external arrears by the FGS;
  - Ceiling on contracting or guaranteeing any new external, non-concessional debt.
- ITs for September and December 2024, and March, June and September 2025:
  - Floor on the FGS fiscal balance (on a cash basis);
  - Ceiling on new domestic debt contracted by the FGS;
  - Ceiling on accumulation of new domestic arrears by the FGS.
- Memorandum Item:
  - Contracting or guaranteeing of any new external, concessional debt, excluding disbursements under an IMF arrangement.

### Continuous performance criteria (Article VIII commitments)
- Continuous PCs include non-introduction of exchange restrictions and multiple currency practices per Article VIII:
  - Non-imposition or intensification of restrictions on payments and transfers for current international transactions;
  - Non-introduction or modification of multiple currency practices;
  - Non-conclusion of bilateral payments agreements inconsistent with Article VIII;
  - Non-imposition or intensification of import restrictions for balance of payments reasons.
- These non-quantitative continuous PCs are not listed in the PC table (Table 1) annexed to the MEFP.

### Definitions used for program monitoring
- Government definitions:
  - "Government" = FGS (excludes public entities with autonomous legal personalities and federal member states (FMS)).
  - "General government" for external debt monitoring = FGS + FMS (Galmudug, Hirshabelle, Jubaland, Puntland, and South West State) + Banaadir region.
- Government revenue and expenditure:
  - Defined per GFSM 2014 on a cash basis; recognized when cash is received/paid; cumulative from the beginning of the fiscal year (calendar year).
  - Financing transactions (including amortization of World Bank and other debt, receipts and repayments of CBS advances, withdrawal and reconstitution of SDRs distributed to the MoF) are excluded from revenue and expenditure.
  - Interest payments are included in expenditure.
  - Receipts from disposal of nonfinancial assets are excluded from revenue.
  - Somalia Financial Management Information System (SFMIS) reports used for monitoring, supplemented by monthly MoF financial reports.
- Government domestic revenue:
  - Includes all tax and nontax receipts received into FGS general accounts; excludes grants.
  - Excludes (i) grants and other noncompulsory contributions from foreign governments or international organizations, and (ii) transfers of CBS distributable earnings not included in the Appropriation Law.
- Spending on compensation, goods & services, contingencies:
  - Excludes expenditure under project appropriations specified in the Appropriation Law.
  - Determined in line with GFSM 2014.
  - Expenditure ceiling excludes commission paid to the CBS from spending on goods and services.
  - Data reporting requests expenditures by 4-digit object code for each MDA with breakdown by financing source.
- Tax exemptions reporting requirements (PFM Law):
  - Article 5 (3): Within 7 days of granting an exemption the Minister must notify Council of Ministers and Auditor General.
  - Article 5 (4): Minister must submit exemptions to both Houses of Parliament on or before March 31st, June 30th, September 30th, and December 31st each financial year.
  - Article 5 (5): Reports must show micro-level detail of recipients, reasons, taxes due but not paid, and benefits to Government.
  - Article 18 (1)(f): Proposed Budget Appropriation Bill must contain annual tax exemption report.

### Budget execution control points
- Allotment: ceiling on warrants to be requested by MDAs during a period; issued by MoF within available funds.
- Warrant: ceiling on commitments to be made by MDAs during a period; issued by MoF on request within the available allotment; once approved, reduces available allotment.
- Commitment: contract or legally binding agreement to make payments; includes continuing agreements (e.g., compensation of employees). Liability recognized only upon delivery for goods/services.

### Fiscal balance and adjustor
- Fiscal balance (cash basis) = (i) total government revenue (including domestic revenue, transfers of CBS distributable earnings not in the Appropriation Law, and grants) minus (ii) total government expenditures (excluding foreign-financed off-budget expenditure).
- Adjustor to the fiscal balance floor:
  - Floor adjusted down by delays or shortfalls in budget support grants relative to budget estimate, up to maximum amounts in TMU Table 1, to cover priority spending per sequestration rule, provided no overruns in other non-priority spending.
  - Floor also adjusted down by any higher amounts of interest payments compared to the budget estimate.

### Arrears definitions
- New domestic arrears:
  - FGS obligations to residents unpaid 90 days after due date (after contractual grace periods lapse).
  - Includes CBS advances, borrowing from commercial banks, accrued but unpaid commitments for compensation, goods & services, interest, mandatory transfer to Banaadir, acquisition of nonfinancial assets.
  - Includes arrears accumulated from beginning of the fiscal year.
- External arrears:
  - Debt obligations to non-residents not paid on contractual due date (plus applicable grace period).
  - Excludes arrears from debt being renegotiated in HIPC context, including Paris Club creditors, and arrears where creditor agreed no payment pending negotiations.
  - For ceiling on new external arrears: nonpayment to Russia will not constitute arrears when Central Government and CBS cannot pay due to factors outside Somalia’s control, provided payments have been made in full into a designated third-party account by the contractual due date and the account meets specified conditions (no third-party access, funds used only to service the debt, funds transferable back to MoF only with legal evidence for alternative servicing or transfer to similar account). Use or withdrawal for other purposes breaches the PC.

### Debt definitions and concessionality
- Debt defined per Executive Board Decision No. 15688 (14/107), residency basis:
  - Debt = current liability under contractual arrangement created by provision of value (assets/services) requiring future payments in assets/services to discharge principal and/or interest.
  - Forms include loans (deposits, bonds, debentures, commercial loans, buyers’ credits, repurchase agreements, official swaps), suppliers’ credits, and leases.
  - For leases: debt is present value (at inception) of all lease payments expected during the agreement, excluding payments for operation, repair, or maintenance.
- Arrears, penalties, judicial damages arising from failure to make payment under contractual debt are debt; failure to pay obligations not considered debt (e.g., payment on delivery) does not give rise to debt.
- Domestic debt:
  - Counterparty resident of Somalia, including the CBS.
  - Excludes temporary advances for liquidity management from the CBS (fully repaid within 90 days).
  - QPCs and ITs are cumulative ceilings on contracting new domestic debt from beginning of fiscal year.
- External debt QPCs/ITs:
  - Cumulative ceilings on contracting or guaranteeing new non-concessional borrowing by the general government from beginning of fiscal year.
  - Memorandum item on contracting new concessional borrowing from beginning of fiscal year.
  - External debt defined by residency of creditor and deemed contracted when underlying loan agreement is signed.
  - Excludes IMF disbursements.
  - Government must report planned external borrowing and terms to Fund staff before contracting or guaranteeing.
  - Concessional borrowing = grant element of at least 35 percent. Grant element calculation:
    - Grant element = (NPV of debt subtracted from nominal value) / nominal value, using discount rate of 5 percent.
  - Highly concessional financing = at least 50 percent grant element.

### CBS Net International Reserves (NIR) and adjustors
- NIR = gross foreign assets − gross foreign liabilities.
- Valuations:
  - All SDRs valued over calendar year at August 31, 2023 exchange rate of US$1.329940 per SDR.
  - IMF representative exchange rates against the U.S. dollar at August 31, 2023 used for other currencies.
- Assets/liabilities related to the designated CBS account holding FGS debt service deposits (per paragraph 12) are excluded from NIR for program purposes.
- Gross foreign assets:
  - Sum of (i) gold (valued over the calendar year at the market price of August 31, 2023 (US$ 1,942.9 per ounce)); (ii) total foreign exchange held abroad; (iii) Somalia’s SDR holdings in the IMF SDR Department;
  - Net of (iv) all SDR holdings that belong to the MoF.
- Gross foreign liabilities:
  - Sum of (i) government deposits at the CBS in foreign currency held abroad; (ii) other earmarked foreign currency deposits at the CBS by residents held abroad; (iii) outstanding IMF credits and loans; (iv) total amount of SDR general allocation;
  - Net of (v) the MoF share of the 2021 General SDR Allocation as per the September 2021 Memorandum of Understanding between the MoF and the CBS; and (vi) SDRs disbursed under the ECF arrangement for budget support.
- Adjustors to the NIR floor (would adjust NIR floor downward by maximum amounts in TMU Table 2 if materialized):
  - Adjustor 1: if the CBS transfers distributable earnings to the government.
  - Adjustor 2: if the CBS provides temporary liquidity advances to the MoF.
  - In line with CBS Law: total outstanding CBS advances shall not exceed 15 percent of the most recent audited domestic revenue of FGS; for 2024 the most recent audited domestic revenue corresponds to 2023 and the maximum amount of liquidity advances from the CBS is USD49.4 million; for 2025 the most recent audited domestic revenue will correspond to 2024 and the maximum amount of liquidity advances from the CBS is currently estimated at USD53.7 million—this amount will need updating in forthcoming program reviews once audited accounts for 2024 become available. In line with the Appropriation Law, all liquidity advances should be repaid by end-December of the fiscal year. In line with the Short-Term Government Financing Agreement (CBS–MoF, June 21, 2021), maturity of temporary advances should not exceed 90 days.

### TMU numerical entries (maximum adjustments and memorandum items)
- Table 1. Somalia: Adjustor to the Fiscal Balance Floor, Maximum Amount (US$ million, cumulative flows from the beginning of each calendar year)
  - Maximum amount of the fiscal balance adjustor related to delays or shortfalls in budget support grants:
    - Sep-24: 148.0
    - Dec-24: 108.3
    - Mar-25: 0.0
    - Jun-25: 36.0
    - Sep-25: 61.0
  - Memorandum items:
    - Budget support grants in the Budget estimate:
      - Sep-24: 170.0
      - Dec-24: 188.0
      - Mar-25: 0.0
      - Jun-25: 36.0
      - Sep-25: 61.0
    - Interest payments in the Budget estimate:
      - Sep-24: 9.8
      - Dec-24: 9.8
      - Mar-25: 13.8
      - Jun-25: 13.8
      - Sep-25: 13.8
    - Possible sources of financing for fiscal deficit:
      - Sep-24: 148.0
      - Dec-24: 108.3
      - Mar-25: 150.9
      - Jun-25: 150.6
      - Sep-25: 150.2
    - Withdrawal of cash buffers 1/:
      - Sep-24: 29.1
      - Dec-24: 29.1
      - Mar-25: 18.4
      - Jun-25: 18.4
      - Sep-25: 18.4
    - MOF SDR holdings 3/:
      - Sep-24: 69.5
      - Dec-24: 79.2
      - Mar-25: 78.8
      - Jun-25: 78.5
      - Sep-25: 78.2
    - Proceeds from CBS temporary advances 2/:
      - Sep-24: 49.4
      - Dec-24: 0.0
      - Mar-25: 53.7
      - Jun-25: 53.7
      - Sep-25: 53.7
  - Footnotes (excerpted numerical details):
    - For 2024, maximum amount of liquidity advances from the CBS is USD49.4 million.
    - For 2025, maximum amount of liquidity advances from the CBS is currently estimated at USD53.7 million.
- Table 2. Somalia: Adjustors to the NIR Floor (US$ million, cumulative flows from the beginning of each calendar year)
  - Adjustor 1, if the CBS transfers distributable earnings to the government:
    - Sep-24: -0.2
    - Dec-24: -0.2
    - Mar-25: -0.2
    - Jun-25: -0.2
    - Sep-25: -0.2
  - Adjustor 2: if the CBS provides temporary liquidity advances to the government 1/:
    - Sep-24: -49.4
    - Dec-24: 0.0
    - Mar-25: -53.7
    - Jun-25: -53.7
    - Sep-25: -53.7
  - Footnote reiteration:
    - For 2024 maximum liquidity advances = USD49.4 million; for 2025 currently estimated = USD53.7 million; repayable by end-December; maturity should not exceed 90 days.

*Source: MEFP section "The quantitative performance criteria (QPC) and indicative targets (IT) are specified."*

### 19. Program Monitoring Committee. The Somali authorities shall maintain a program-

### 1somea2024002-print-pdf - 19. Program Monitoring Committee. The Somali authorities shall maintain a program-

### Program Monitoring Committee (TWG)
- The Somali authorities shall maintain a program-monitoring Technical Working Group (TWG) composed of senior officials from the Ministry of Finance (MoF), the CBS, Financial Reporting Centre (FRC), Somalia National Bureau of Statistics (SNBS), and the Ministry of Planning, Investment and Economic Development (MoPIED).
- The IMF Resident Representative will have observer status on this working group.
- TWG responsibilities:
  - Monitoring the performance of the program.
  - Recommending policy responses.
  - Informing the Fund regularly on program performance.
  - Transmitting supporting materials necessary for the evaluation of benchmarks.
  - Providing the Fund with quarterly progress reports on the program within four weeks of the end of each quarter, using the latest available data.

### Data Reporting to the Fund — summary of obligations (Table 3, December 2023–December 2026)
- Reporting agencies with standing obligations: Central Bank of Somalia (CBS), Financial Reporting Center (FRC), Ministry of Finance (MoF), Somalia National Bureau of Statistics (SNBS), and MoPIED.
- Timing convention examples preserved exactly as in the source:
  - Monthly reports: "3 weeks after the end of each month." and "4 weeks after the end of each month." (varies by data type).
  - Quarterly reports: "4 weeks after the end of each quarter."
  - Annual and other timings as specified (e.g., "Annually 6 months after the end of the year.", "Annually 4 months after the end of the year.", "Annually 30 days after the end of each year").
- Examples from Table 3 (description, frequency, timing preserved):
  - Central Bank of Somalia — Monetary Survey: "Detailed balance sheet data of the CBS submitted in the reporting template." — Monthly — "3 weeks after the end of each month."
  - Central Bank of Somalia — Monetary Survey: "Consolidated commercial banks’ balance sheet data submitted in the reporting template, including deposits by mobile money operators (MMOs)." — Quarterly — "4 weeks after the end of each quarter."
  - Central Bank of Somalia — Financial data not in broad money: "Volume and value of mobile money transaction." — Quarterly — "4 weeks after the end of each quarter."
  - Central Bank of Somalia — Other financial indicators: "Prudential data as per associated CBS regulations (total capital, core capital, total net assets, high quality liquid assets, and 30-day funding requirement, capital adequacy ratio, liquidity coverage ratio), and average profit rates and tenor information for private sector financing assets from banks." — Quarterly — "4 weeks after the end of each quarter."
  - Central Bank of Somalia — FGS external accounts: "Provide end-month balances included in the Treasury Single Account held abroad by the CBS on behalf of the FGS, including on-budget grants and the fiscal buffer." — Monthly — "3 weeks after the end of each month."
  - Central Bank of Somalia — Designated account at CBS into which debt service payments due to Russia are paid into: "Provide end-month balances and within month flows of the designated account at the CBS into which debt service payments due to Russia are paid in full by the contractual due date, taking into account any contractual grace periods." — Monthly — "3 weeks after the end of each month."
  - Financial Reporting Center — AML/CFT compliance data: "On a monthly basis, total number of each STR, LCTR, and Nil reports received from banks, MTBs, and MMOs. Total number of each banks, and MTBs that have submitted reports during the period. MMO reporting to be added as oversight and supervision develops, but latest for end-December 2020 data point." — Quarterly — "4 weeks after the end of each quarter."
  - Ministry of Finance — FGS budget operations (annual and supplemental budgets): detailed requirements including "Revenue by GFS 6-digit revenue classification;" "Statement of tax exemption for the previous 12-month period (annual budget only);" "Proposed Appropriation by MDA, program/project and 4-digit object  code;" and others — As required — "Within a week of submission to Cabinet and to the Parliament; and when signed by the President."
  - Ministry of Finance — Current year SFMIS reports showing budget, virements, and monthly data for specified GFS classifications and MDA details — Monthly — "4 weeks after the end of each month."
  - Ministry of Finance — Customs: "Total customs duties paid through SOMCAS (Excel format) ... Separately for the Mogadishu seaport and airport: total customs duties paid through SOMCAS, the number of declarations registered in SOMCAS, the number of assessments accepted by customs through SOMCAS, the number of payments received through SOMCAS, and the number of releases registered through SOMCAS (Excel format)" — Monthly — "4 weeks after the end of the month (starting January 2025)"
  - Ministry of Finance — BRA fiscal operations: "Reports of revenue and expenditure of the Banaadir region." — Monthly — "6 weeks after the end of each month (from September 2024)."
  - Somalia National Bureau of Statistics — CPI: "Price indices for all goods and subcategories" — Monthly — "Every 15th of the month consistent with inflation report"
  - Somalia National Bureau of Statistics — GDP: "GDP by expenditure data" — Annually — "6 months after the end of each year."

### Low-Income Countries Debt Sustainability Analysis (LIC-DSA) — key findings and projections
- This LIC-DSA update adds two elements to the April 2024 LIC-DSA:
  - "US$125 million under the World Bank’s Development Policy Financing instrument in 2024 on grant terms (compared to US$75 million assumed previously)"
  - Updated macroeconomic and fiscal series and forecasts.
- Risk ratings and assessments:
  - "Somalia is assessed to be at moderate risk of debt distress, both for external and overall public debt."
  - "Risk of external debt distress: Moderate"
  - "Overall risk of debt distress Moderate"
  - "Granularity in the risk rating Substantial space to absorb shocks"
  - "Application of judgment No"
- Debt levels and projections (text preserved as in source):
  - "Total public debt is projected to increase to US$7  78 million in 2024 from US$766   million in 2023 but decline relative to GDP from 7 percent of GDP in 2023 to 6.4   percent of GDP in 2024."
  - "Most public debt is external. The present value (PV) of   public and publicly guaranteed (PPG) external debt is estimated at 4.3 percent of GDP in 2024 – below the 30 percent threshold for countries like Somalia with weak debt carrying capacity."
- Public debt composition and coverage:
  - "The public debt perimeter is the central government."
  - "The estimated total stock of outstanding public debt as of end-2023 is   US$766.3 million, of which US$698.4 million is external while US$67.8 million represents central government wage arrears."
  - "Of the total public and publicly guaranteed (PPG) external debt, almost 67 percent is owed to multilateral creditors and 33 percent is owed to bilateral creditors."
  - "There is no government guaranteed debt, there are no known liabilities of state-owned enterprises (SOEs) or subnational governments, and no public-private partnerships (PPPs)."
- Macroeconomic revisions and implications:
  - "Updated nominal GDP numbers for 2018-2023 published in June 2024 by the Somalia National Bureau of Statistics (SNBS) based on expanded data coverage are lower than the figures in the April 2024 LIC-DSA."
  - "The lower nominal GDP series implies slight increases in the debt-to-GDP ratios due to the denominator effect."
  - Comparative estimates referenced: "Total public debt-to-GDP for 2023 is estimated at 7 percent in the current LIC-DSA, compared to 6.6 percent of GDP estimated in the April 2024 LIC-DSA." and "PPG external debt-to-GDP for 2023 is estimated at 6.4 percent in the current LIC-DSA, compared to 6 percent of GDP estimated in the April 2024 LIC-DSA."
- Financing and grants:
  - "The World Bank’s Development Policy Financing (DPF) operation for FY2024 amounts to US$125 million, compared to US$75 million anticipated in the April 2024 LIC-DSA."
  - "The disbursement related to the DPF operation in August 2024 was provided in the form of a grant, given the extension by the World Bank of grant financing terms for an additional year until June 2025"
  - "Total bilateral budget support grants remained steady in 2024 relative to the First Review and are estimated to be slightly higher in 2025 resulting in slightly lower financing needs (by around US$10 million)."
- Debt-carrying capacity and indicators:
  - The LIC-DSA reflects Somalia’s weak debt carrying capacity considering Somalia’s Composite Indicator of "1.58, based on the April 2024 World Economic Outlook and the 2022 CPIA vintage."
  - The PV of PPG external debt at "4.3 percent of GDP in 2024" is noted relative to the "30 percent threshold."
- Stress test observation:
  - "However, the LIC-DSA involves a breach of the external debt service to revenue indicative threshold in the stress scenario due to the expiry of grace periods on initial loans assumed to be issued under combined shocks."

### Risks, vulnerabilities, and policy implications
- Near-term risks:
  - "Near-term risks are tilted to the downside."
  - Identified risk drivers: "Food insecurity and economic activity can worsen if rainy seasons fail, or new natural disasters hit Somalia."
  - Additional risks: "lower global growth, a deterioration of the global/regional security situation, the ATMIS transition, and political risks linked to federalism."
- Fiscal and financing implications:
  - If adverse risks materialize: "economic growth and domestic revenue would be lower, increasing financing needs."
  - Mitigating factors stated: "existing cash buffers, expenditure rationalization, and current financing commitments help mitigate some risks"
  - Policy emphasis: "underscoring the importance of strengthening domestic revenue mobilization, debt management institutions, and institutional capacity."
- Institutional and market context:
  - "Somalia is mechanically assessed to have substantial space to absorb shocks. However, the country continues to be vulnerable to security, international commodity price, and climate shocks and remains highly dependent on external concessional financing."

*Prepared by the staff of the International Monetary Fund (IMF) and the International Development Association (IDA). November 18, 2024.*

### 7.      Climate risks continue to loom over the nascent economy. According to the

### 7.      Climate risks continue to loom over the nascent economy. According to the 2024 World Bank Somalia Economic Update, over two-thirds of Somali households reported experiencing at least one climate-related natural disaster during 2021-2022.

### Climate impact and structural constraints
- Over two-thirds of Somali households reported experiencing at least one climate-related natural disaster during 2021-2022.
- Climate shocks exacerbate food insecurity by compounding broader challenges in the agriculture sector, including:
  - weak security and institutions,
  - inadequate investment and standards,
  - poor infrastructure.
- The country lacks the capacity to mitigate these shocks, including because of inadequate financial resources, infrastructure, and social safety net.

### Public debt indicators (reported values)
- Using GDP figures in the April 2024 LIC-DSA 1/:
  - Total public debt-to-GDP ratio: 6.6
  - PPG external debt-to-GDP ratio: 6.0
  - PV of total public debt-to-GDP ratio: 4.8
  - PV of PPG external debt-to-GDP ratio: 4.2
  - PV of PPG external debt-to-exports ratio: 23.3
  - PPG external debt service-to-exports ratio: 0.7
- Using GDP figures in the Current LIC-DSA:
  - Total public debt-to-GDP ratio: 6.1
  - PPG external debt-to-GDP ratio: 5.5
  - PV of total public debt-to-GDP ratio: 4.6
  - PV of PPG external debt-to-GDP ratio: 4.1
  - PV of PPG external debt-to-exports ratio: 21.4
  - PPG external debt service-to-exports ratio: 0.9
- (Second pair of years presented in source:)
  - Total public debt-to-GDP ratio: 7.0 and 6.4
  - PPG external debt-to-GDP ratio: 6.4 and 5.9
  - PV of total public debt-to-GDP ratio: 5.1 and 4.9
  - PV of PPG external debt-to-GDP ratio: 4.4 and 4.3
  - PV of PPG external debt-to-exports ratio: 22.5 and 21.0
  - PPG external debt service-to-exports ratio: 0.7 and 0.9
- Sources: Somali authorities and IMF staff calculations.
- Note: Total public debt, PPG external debt, PV of total public debt, PV of PPG external debt, and external debt service (numerators) are the same as in the current LIC-DSA, with denominators (GDP and exports) from the April 2024 LIC-DSA.

### Country classification and stress-test framework
- Somalia’s debt-carrying capacity continues to be classified as weak.
- This LIC-DSA uses the April 2024 vintage of the WEO and the 2022 CPIA.
- Latest available composite indicator score for Somalia: 1.58 (Text Table 4).
- The risk rating and stress-test determination use these vintages and indicators.

### Risk rating and vulnerabilities
- Somalia is assessed to be at moderate external and overall risk of public debt distress.
- The higher amount of grant financing in 2024 under the DPF and the slight increase in budget support grants in 2025 do not have a material impact on the medium-term risk outlook or across the LIC-DSA’s assessment horizon that ends in 2034.
- While key indicators are contained in the baseline, the breach of the indicative threshold for the external debt service-to-revenue ratio under standardized stress tests suggests:
  - Somalia is at moderate risk of external debt distress,
  - Somalia is at moderate overall risk of public debt distress.
- The total public debt indicator remains under the benchmark across the baseline and stress scenarios.
- The trajectory of public debt service-to-revenue under standardized stress tests highlights the need for vigilant debt management.
- A natural disaster tailored stress test to account for potential climate shocks similar to the droughts of 2023 produces debt and debt burden paths that are more benign than the most extreme stress environment8 in the standardized stress test.9
- The moderate risk rating tool mechanically indicates that Somalia has substantial space to absorb shocks.
- Somalia remains vulnerable to:
  - security shocks,
  - international commodity price shocks,
  - climate stress events.
- Somalia remains highly dependent on external concessional financing, underscoring the importance of:
  - strengthening domestic revenue mobilization,
  - strengthening debt management institutions,
  - strengthening institutional capacity.

### AUTHORITIES’ VIEWS

*Source: Excerpt from 1somea2024002-print-pdf.*

### 10.        The assumptions and conclusions of the LIC-DSA were discussed with the authorities, who

### 10.        The assumptions and conclusions of the LIC-DSA were discussed with the authorities, who

### Authorities' assessment and reform priorities
- The authorities broadly concurred with staffs’ assessment.
- The authorities recognize the importance of relying on concessional financing post-HIPC to contain debt sustainability risks.
- The authorities will monitor the external debt service-to-revenue indicator as an early warning sign for any debt-related stress.
- Agreed policy priorities and capacity actions:
  - Strengthen debt management capacity.
  - Ensure transparency regarding all the terms and conditions of different borrowings to have a full view of costs and risks.
  - Ongoing reforms—particularly domestic revenue mobilization—are expected to improve the country’s debt servicing capacity.
- The World Bank’s Country Climate and Development Report (CCDR) on Somalia—expected to be finalized in 2025—is noted as a future input for quantitative assessments in debt sustainability analyses given continuing climate vulnerabilities.

### External Debt Sustainability Framework — Baseline Scenario, 2021–2044 (selected indicators and projections)
- External debt (nominal) 1/: 2021 41.4 2022 37.5 2023 6.4 2024 5.9 2025 6.1 2026 7.6 2027 9.2 2028 10.8 2029 12.4 2034 19.5 2044 31.4 44.1 12.4
- Change in external debt: -9.8 -3.8 -31.1 -0.5 0.2 1.5 1.6 1.5 1.7 1.4 1.1
- Identified net debt-creating flows: -2.8 0.5 1.5 3.0 3.1 4.1 4.3 4.3 4.2 5.0 2.4 -0.6 4.3
- Non-interest current account deficit: 7.0 8.6 9.3 8.8 8.7 9.7 9.9 9.9 9.9 11.0 8.7 5.6 10.1
- Deficit in balance of goods and services: 52.9 62.9 60.8 61.4 61.1 58.5 57.8 57.6 57.4 56.0 53.4 51.4 57.8
- Exports: 16.2 17.7 19.7 20.5 21.1 21.8 22.5 22.8 23.1 24.2 23.7
- Imports: 69.0 80.6 80.6 81.8 82.2 80.3 80.3 80.5 80.4 80.2 77.1
- Net current transfers (negative = inflow): -46.2 -54.7 -51.9 -52.7 -52.7 -49.1 -48.2 -47.9 -47.6 -45.1 -44.6 -46.2 -47.9
  - of which: official: -23.9 -33.7 -32.7 -32.9 -32.8 -29.0 -28.1 -27.8 -27.6 -25.1 -24.6
- Net FDI (negative = inflow): -5.2 -5.2 -5.2 -5.7 -5.4 -5.4 -5.4 -5.4 -5.4 -5.4 -5.4 -4.9 -5.4
- Endogenous debt dynamics 2/: -4.6 -2.9 -2.6 -0.1 -0.1 -0.1 -0.2 -0.3 -0.3 -0.6 -0.9
  - Contribution from nominal interest rate: 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.4
  - Contribution from real GDP growth: -1.6 -1.0 -1.5 -0.2 -0.2 -0.2 -0.3 -0.4 -0.5 -0.8 -1.3
  - Contribution from price and exchange rate changes: -3.0 -1.9 -1.1 ........................
- Residual 3/: -7.1 -4.3 -32.6 -3.5 -2.9 -2.6 -2.7 -2.7 -2.5 -3.6 -1.3 -11.5 -3.1
  - of which: exceptional financing: -0.2 0.0 -28.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Sustainability indicators (selected):
  - PV of PPG external debt-to-GDP ratio: ...... 4.4 4.3 4.8 5.3 5.9 6.5 7.1 11.3 20.2
  - PV of PPG external debt-to-exports ratio: ...... 22.5 21.0 22.7 24.4 26.3 28.4 31.0 46.6 85.4
  - PPG debt service-to-exports ratio: 1.1 0.9 0.7 0.9 0.9 0.9 0.9 0.8 1.3 1.6 4.1
  - PPG debt service-to-revenue ratio: 7.4 6.2 4.7 5.9 5.6 5.3 5.0 4.6 6.5 6.7 11.8
  - Gross external financing need (Million of U.S. dollars): 191.8 361.4 464.6 400.4 446.8 632.0 725.9 802.9 879.4 1525.9 2129.1
- Key macroeconomic assumptions (selected):
  - Real GDP growth (in percent): 3.5 2.7 4.2 4.0 4.0 4.1 4.1 4.3 4.5 4.5 4.5 2.7 4.3
  - GDP deflator in US dollar terms (change in percent): 6.2 4.7 3.2 6.2 3.4 4.8 5.5 4.4 2.6 2.4 2.1 3.7 3.5
  - Effective interest rate (percent) 4/: 0.0 0.0 0.0 1.8 1.7 1.6 1.3 1.2 1.0 1.0 1.3 0.0 1.2
  - Growth of exports of G&S (US dollar terms, in percent): 30.0 17.7 20.0 14.6 10.6 12.8 13.3 10.6 8.3 7.3 7.2 9.1 10.1
  - Growth of imports of G&S (US dollar terms, in percent): 12.5 25.6 7.5 12.2 8.0 6.6 9.8 9.1 7.2 7.0 6.9 8.6 8.0
  - Grant element of new public sector borrowing (in percent): ......... 32.2 64.9 58.6 57.1 58.5 56.8 45.8 45.8 39.8 ... 51.7
  - Government revenues (excluding grants, in percent of GDP): 2.4 2.6 3.0 3.0 3.3 3.6 3.9 4.2 4.5 5.7 8.2 2.2 4.4
  - Aid flows (in Million of US dollars) 5/: 64.4 62.7 418.5 553.6 536.0 502.6 491.7 482.4 519.4 710.9 772.5
  - Grant-equivalent financing (in percent of GDP) 6/: ......... 4.6 4.0 2.8 2.1 1.9 1.7 1.3 1.4 ... 2.2
  - Grant-equivalent financing (in percent of external financing) 6/: ......... 97.6 94.0 76.0 67.6 65.1 61.0 45.8 45.8 39.8 ... 64.5
  - Nominal GDP (Million of US dollars): 9,484 10,203 10,969 12,111 13,018 14,197 15,584 16,973 18,205 25,579 49,511
  - Nominal dollar GDP growth: 9.9 7.6 7.5 10.4 7.5 9.1 9.8 8.9 7.3 7.0 6.7 6.6 8.0
- Memorandum items:
  - PV of external debt 7/: ...... 4.4 4.3 4.8 5.3 5.9 6.5 7.1 11.3 20.2
  - In percent of exports: ...... 22.5 21.0 22.7 24.4 26.3 28.4 31.0 46.6 85.4
  - Total external debt service-to-exports ratio: 1.1 0.9 0.7 0.9 0.9 0.9 0.9 0.8 1.3 1.6 4.1
  - PV of PPG external debt (in Million of US dollars): 487.6 519.6 623.5 756.0 920.2 1,098.8 1,300.0 2,887.6 10,022.5
  - (PVt-PVt-1)/GDPt-1 (in percent): 0.3 0.9 1.0 1.2 1.1 1.2 1.7 2.2
  - Non-interest current account deficit that stabilizes debt ratio: 16.9 12.4 40.4 9.3 8.4 8.1 8.3 8.4 8.3 9.6 7.6
- Notes and technical assumptions:
  - Sources: Country authorities; and staff estimates and projections.
  - 1/ Includes both public and private sector external debt.
  - 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt.
  - 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes.
  - 4/ Current-year interest payments divided by previous period debt stock.
  - 5/ Defined as grants, concessional loans, and debt relief.
  - 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt).
  - 7/ Assumes that PV of private sector debt is equivalent to its face value.
  - 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
  - 9/ The macroeconomic framework assumes HIPC Completion Point in December 2023.

### Public Sector Debt Sustainability Framework — Baseline Scenario, 2021–2044 (selected indicators)
- Public sector debt 1/: 42.1 38.2 7.0 6.4 6.6 8.1 9.6 11.1 12.7 19.7 31.4 44.9 12.7
  - of which: external debt: 41.4 37.5 6.4 5.9 6.1 7.6 9.2 10.8 12.4 19.5 31.4 44.1 12.4
- Change in public sector debt: -9.9 -3.9 -31.2 -0.6 0.2 1.5 1.5 1.5 1.6 1.4 1.1
- Identified debt-creating flows: -4.0 -3.0 -31.2 -0.4 0.8 1.5 1.6 1.5 1.6 1.4 1.1 -12.2 1.2
- Primary deficit: 0.9 0.0 -0.1 0.1 1.1 2.0 2.2 2.2 2.3 2.4 2.6 -0.1 1.9
- Revenue and grants: 4.0 7.1 6.8 7.5 6.8 5.1 4.6 4.6 4.7 5.7 8.2 4.1 5.4
  - of which: grants: 1.5 4.5 3.8 4.6 3.5 1.5 0.8 0.5 0.3 0.0 0.0
- Primary (noninterest) expenditure: 4.8 7.0 6.7 7.6 7.9 7.1 6.8 6.8 7.0 8.1 10.8 4.0 7.4
- Automatic debt dynamics: -4.7 -3.0 -2.7 -0.5 -0.3 -0.4 -0.6 -0.7 -0.6 -1.0 -1.5
  - Contribution from interest rate/growth differential: -4.7 -3.0 -2.7 -0.5 -0.3 -0.4 -0.6 -0.7 -0.6 -1.0 -1.5
  - of which: contribution from average real interest rate: -2.9 -1.8 -1.1 -0.3 -0.1 -0.2 -0.3 -0.3 -0.2 -0.2 -0.2
  - of which: contribution from real GDP growth: -1.7 -1.1 -1.5 -0.3 -0.2 -0.3 -0.3 -0.4 -0.5 -0.8 -1.3
- Other identified debt-creating flows: -0.2 0.0 -28.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -9.0 0.0
  - Debt relief (HIPC and other): -0.2 0.0 -28.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
- Residual: -5.9 -0.9 0.1 -0.1 -0.6 0.0 0.0 0.0 0.0 0.0 0.0 -0.1
- Sustainability indicators (selected):
  - PV of public debt-to-GDP ratio 2/: ...... 5.1 4.9 5.3 5.8 6.3 6.8 7.4 11.4 20.3
  - PV of public debt-to-revenue and grants ratio: ...... 74.9 64.4 78.2 113.3 136.1 147.8 157.3 201.5 247.6
  - Debt service-to-revenue and grants ratio 3/: 4.5 2.3 2.1 2.3 2.7 4.1 4.6 4.6 6.5 6.9 11.8
  - Gross financing need 4/: 0.9 0.1 -28.4 0.0 0.7 2.1 2.4 2.4 2.6 2.8 3.6
- Key macro and fiscal assumptions (selected):
  - Real GDP growth (in percent): 3.5 2.7 4.2 4.0 4.0 4.1 4.1 4.3 4.5 4.5 4.5 2.7 4.3
  - Average nominal interest rate on external debt (in percent): 0.0 0.0 0.0 1.8 1.7 1.6 1.3 1.2 1.0 1.0 1.3 0.0 1.2
  - Average real interest rate on domestic debt (in percent): -5.9 -4.5 -3.1 -5.8 -3.2 -4.5 -5.2 -4.2 -2.6 -2.3 -2.1 -3.3 -3.4
  - Inflation rate (GDP deflator, in percent): 6.2 4.7 3.2 6.2 3.4 4.8 5.5 4.4 2.6 2.4 2.1 3.7 3.5
  - Growth of real primary spending (deflated by GDP deflator, in percent): -8.3 49.4 -0.9 18.4 8.1 -7.2 0.4 4.1 7.8 8.1 7.5 18.8 6.3
  - Primary deficit that stabilizes the debt-to-GDP ratio 5/: 10.8 3.9 31.1 0.7 0.9 0.5 0.6 0.7 0.6 1.0 1.5 15.3 0.8
- Notes:
  - 1/ Coverage of debt: The central government, central bank, government-guaranteed debt, non-guaranteed SOE debt. Definition of external debt is Residency-based.
  - 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections.
  - 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt.
  - 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows.
  - 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question.
  - 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
  - 7/ The macroeconomic framework assumes HIPC Completion Point in December 2023.

### Sensitivity analysis and scenario testing (high-level findings)
- Table 3 and Table 4 present extensive sensitivity analysis for key indicators of public and PPG external debt and for public debt across 2024–2034 with:
  - Alternative scenarios (A1): key variables at their historical averages in 2024-2034.
  - Bound tests (B1–B6): shocks to Real GDP growth, Primary balance, Exports, Other flows, Depreciation, and combinations.
  - Tailored tests (C1–C4): combined contingent liabilities, natural disaster (not applicable in several rows), commodity price, and market financing (not applicable in several rows).
- Thresholds and breach indications:
  - A bold value indicates a breach of the threshold or benchmark in the sensitivity tables.
  - Specific projected paths for PV of debt-to-GDP, PV of debt-to-exports, debt service-to-exports, and debt service-to-revenue are provided for baseline and alternative scenarios across 2024–2034.

### Public debt holder profile, debt relief and borrowing program (selected items)
- Public debt holder profile (Table 5, selected):
  - Total debt (In millions of US$) 2022: 3,894.8 (100.0 percent total debt) 2023: 3,?.? [table shows detailed breakdown by creditor categories and percent shares].
  - External: 3,827.0 (98.3 percent total debt) in 2022.
  - Multilateral creditors: 1,074.8 (27.6 percent).
  - IMF 2/: 370.5 (9.5 percent).
  - World Bank 3/: 104.6 (2.7 percent).
  - Bilateral creditors: 2,749.7 (70.6 percent).
  - Domestic: 67.8 (1.7 percent).
  - Of which: in arrears: 67.8 (1.7 percent).
  - Nominal GDP (in millions of US$): 10,203 10,203 10,969 12,111 13,018
  - Notes: Debt records cover loans contracted from 1965 to 2002 and reflect the HIPC Debt Reconciliation Exercise in 2023.
- Projected external borrowing program, Jan 1–Dec 31, 2024 (Table 6, summary):
  - PPG external debt contracted or guaranteed: Volume of new debt, USD million: 20.1 (100 percent).
  - Sources of debt financing: Concessional debt 20.1 (100 percent).
    - o/w IMF prospective 20.1
    - o/w Other 2/ 0.00
  - Non-concessional debt: 0.00
  - Uses of debt financing: Project Financing 0.00; Budget Financing 20.1 (100 percent).
  - Type of interest rate: Fixed Interest Rate 20.1 (100 percent); Variable Interest Rate 0.00.
  - Currency denomination: USD denominated loans 20.1 (100 percent); Loans denominated in other currency 0.00.
  - Memorandum items 5/: Indicative projection FY2025 95.2; Indicative projection FY2026 302.8.
  - 1/ Debt with a grant element of at least 35 percent.
  - 5/ HIPC Completion Point reached in December 2023.
- Progress on negotiations for restructuring outstanding HIPC‑eligible debt (Table 7, as of September 21, 2024):
  - Total enhanced HIPC debt relief in PV terms: 1,903.5 (100.0 percent) with Total Pending 435.1 (22.9 percent).
  - Total Multilateral: 822.5 (43.2 percent) o/w Pending 254.7 (13.4 percent).
  - Paris Club Creditors: 806.6 (42.4 percent).
  - Total Bilateral and Commercial: 1,081.0 (56.8 percent) o/w Pending 180.4 (9.5 percent).
  - Selected bilateral negotiation statuses (enhanced HIPC debt relief in PV terms, US$ million and percent of total assistance under HIPC):
    - AFESD 99.1 5.2 — general consensus on debt relief terms in line with the HIPC Common Reduction Factor (CRF); negotiations continue on softening debt servicing terms.
    - AMF 155.6 8.2 — general consensus on CRF-aligned terms; negotiations continue.
    - IsDB 15.5 0.8 — debt rescheduling agreement over 30-years, zero grace period, zero interest rate; first principal repayment beginning 31st December 2024; officially signed July 16, 2024.
    - OFID 19.3 1.0 — debt rescheduling agreement over 20-years, 10-years grace, interest rate 0.5% per annum; officially signed June 25, 2024.
    - UAE 131.0 6.9 — negotiations advanced on Paris Club comparable terms and softening debt servicing terms.
    - Iraq 32.3 1.7 — authorities requested 100% debt cancellation of remaining 33% of outstanding debt; request is being considered.
    - Libya 14.0 0.7 — fresh letter sent August 19, 2024 to resume negotiations; creditor response awaited.
  - Notes: Data expressed in December 31, 2018 PV terms as revised at completion point; Serbia’s loan reclassified as commercial at completion point based on creditor information.

### Key program and IMF relations (selected)
- HIPC and IMF assistance:
  - Implementation of HIPC Initiative: Decision point Mar 2020; Completion point Dec 2023.
  - Assistance committed by all creditors (US$ Million): 1,903.50.
  - Of which: IMF assistance (US$ million): 182.56 (SDR equivalent 124.63).
  - Disbursement of IMF assistance (SDR Million):
    - Assistance disbursed to the member: 124.63
    - Interim assistance: 4.81
    - Completion point balance: 119.82
    - Additional disbursement of interest income 2: 6.01
    - Total disbursements: 130.64
  - Delivery of Debt Relief at the Completion Point:
    - Debt relief (SDR Million): 250.43
    - Financed by: Somalia Administered Account; Remaining HIPC resources 126.98; Beyond-HIPC debt relief 123.45
    - Debt Relief by Facility (SDR Million) — December 2023: GRA 39.57; PRGT 210.86; Total 250.43
- Exchange and monetary context:
  - Exchange arrangement: de jure and de facto exchange rate arrangements are free floating. Official currency: Somali shilling (SOS). Economy effectively dollarized; de facto currency is the U.S. dollar.
- Capacity development:
  - Somalia receives substantial CD from the Fund focused on revenue administration, tax policy, expenditure policy, public financial and debt management, AML/CFT, financial supervision and regulation, payments system oversight, government finance statistics, external sector statistics, CPI and national accounts statistics, monetary and financial sector statistics, and LEG support.
  - Somalia Country Fund (SCF) donors: Canada, the European Union, Italy, Saudi Arabia, Sweden, and the United Kingdom.
- Program performance and near-term prospects (authorities’ statement, December 9, 2024):
  - Authorities met all quantitative performance criteria and indicative targets for end-June 2024 and September 2024 and implemented all Structural Benchmarks due for the review period.
  - Recent economic developments:
    - 2023 growth: 4.2 percent (up from 2.7 percent in 2022).
    - Growth projected at 4.0 percent for 2024 and 2025, rising to 4.5 percent by 2029.
    - Inflation: 5.3 percent in September 2024.
  - Fiscal policy: domestic revenue at 3.0 percent of GDP is insufficient; Medium Term Revenue Roadmap for 2024-2027 approved to guide revenue mobilization.
  - Humanitarian and climate vulnerability: As of October 2024 OCHA report, 9.1 million people (47 percent of population) affected by multiple shocks; approximately 5.98 million will require assistance in 2025.
  - Security: A l-Shabaab’s territorial control diminished; ATMIS troops to end in December 2024; new AU Support and Stabilization Mission expected January 2025.
  - National Transformation Plan (NTP) to replace Ninth National Development Plan, expected launch January 2025.

*Source: Staff Report for the 2024 Article IV Consultation and Second Review under the Extended Credit Facility Arrangement—Informational Annex (selected tables and text).*

### 0.3 percent annually to sufficiently finance government operations by 2027. Additionally, the roadmap

### 0.3 percent annually to sufficiently finance government operations by 2027. Additionally, the roadmap

### Revenue mobilization and tax administration
- Roadmap aims to lay the foundation for sustained revenue growth by instituting tax policy reforms, strengthening the legal framework, and improving administrative capacity.
- Customs modernization priorities:
  - Full operationalization of the Somalia Customs Administration System (SOMCAS).
  - Timely adoption of an ad valorem tariff structure.
  - These measures are required under the EAC’s customs union and have significant revenue potential.
- Income tax reforms:
  - Immediate and diligent implementation of the modern Income Tax Law currently in parliamentary for approval will significantly contribute to the government’s ability to collect more revenue.
- Digitalization and systems:
  - Authorities are increasingly using technology by automating as many functions as possible and allowing taxpayers to pay their taxes electronically.
  - Intend to accelerate the development of an Integrated Tax Administration System (ITAS) to strengthen revenue administration and improve efficiency.

### Public financial management (PFM) and public investment
- Somali authorities are committed to strengthening public finance management.
- Plans for the Somali Financial Management Information System (SFMIS):
  - Extend the coverage and use of SFMIS with the goal of moving towards a paperless environment in the PFM system.
  - Implement digital signature, incorporate more manual activities into the system, eliminate parallel processes, and link SFMIS to other systems such as SOMCAS and ITAS.
- Transparency and budgeting:
  - Plan to amend the PFM regulations to include explicit costing of development spending in the budget.
- Public investment and PPPs:
  - Taking concrete steps to improve public investment management capacity and create legal and institutional frameworks to manage future public-private partnerships (PPPs).
  - Requested the IMF to conduct a Public Investment Management Assessment to guide future reforms.
  - Once the PPP law (currently awaiting parliamentary approval) is enacted, intend to complete necessary regulations and institutional framework to ensure transparency, robust project selection, and management processes to minimize potential fiscal risks.

### Social safety nets and pensions
- Baxnaano cash transfer program (with World Bank support) provides regular cash transfers to 50,000 of the most vulnerable households.
- Unified Social Registry expansion:
  - Conducting a survey to increase the number of households in the Unified Social Registry from the current 530,000 to 1.9 million.
- Pension reforms:
  - In April 2024, a new Pension Law for Civil Servants was enacted — the first in Somalia.
  - Efforts underway to operationalize the new pay-as-you-go pension, defined benefit, scheme.
  - Authorities will create a realistic implementation plan that will pay close attention to the fiscal implications of the pension scheme while considering the on-going civil service pay and grade reform.
  - A new pension scheme for the security sector is also under development.

### Monetary and financial sector policies
- Central Bank of Somalia (CBS) governance, legal, and regulatory strengthening:
  - Noteworthy progress in implementing recommendations from the 2024 Safeguards Assessments.
  - Financial Institutions Law, the National Payment System, and the Insurance Law are currently under Parliamentary consideration and are expected to be enacted by mid-next year.
- Supervisory and payment system developments:
  - With IMF support, CBS adopted a comprehensive action plan to enhance supervisory data reported by commercial banks.
  - In September 2024, expanded number of licensed mobile money operators (MMOs) to five and stepped up onsite and offsite supervision activities.
  - Completed development of a National QR code and instant payment system, expected to be operationalized in December 2024 as part of the National SWITCH system.
- Currency reform and currency board:
  - Currency reform is a national priority despite operational and financial challenges.
  - With World Bank and IMF support, intend to secure necessary finances and develop an operational plan to implement the first phase: exchange the counterfeit single denomination currency currently in circulation.
  - Working to shore up logistical plans and secure support of all Federal Member States.
  - Authorities have decided to adopt a Currency Board Arrangement as their preferred monetary and foreign exchange regime.
  - The Central Bank Act, currently under review, will be amended to provide legal foundation.
  - With IMF support, putting in place institutional reforms and monetary policy instruments, including improving CBS capacity, strengthening accuracy and quality of monetary and macroeconomic data, completing the legal framework, and building foreign reserves.
- AML/CFT and remittances:
  - Working to strengthen the AML/CFT framework to ensure continued flow of remittances and promote correspondent banking relationships.
  - Somalia completed the self-assessment and provided all necessary documentation, but the planned MENAFATF site visit originally scheduled for August 2024 has been delayed due to security concerns.
  - Authorities are improving coordination among institutions and updating the terrorist financing risk assessment.
  - National Identification and Registration Agency (NIRA) has commenced issuance of national IDs and signed a Memorandum of Understanding with the CBS and the Somali Banks Association to link the national ID with banking services and facilitate implementation of the upcoming eKYC regulation.

### Structural reforms and governance
- Federalism and constitutional review:
  - Advancing the federalism agenda by completing the constitutional review process.
  - National Consultative Council making steady progress on fiscal federalism, including high level agreement on creation of a revenue authority and revenue assignment.
  - In March 2024, revisions to four out of the fifteen chapters of the Constitution were approved in a joint session of both houses of the Somali Parliament; the rest are under review.
- Climate change resilience and food security:
  - Developed a National Climate Change Policy and a Food Security Crisis Plan; developing community-based adaptation strategies.
  - With FAO support, implementing initiatives to promote climate-smart agricultural practices, access climate-resilient seeds, and improve irrigation techniques.
  - Authorities note that meaningful investment to build climate resilience and strengthen food security will not be possible without support from development partners given current fiscal situation.
- EAC accession implications:
  - Somalia’s accession to the East African Community will impact short- to medium-term reform priorities.
  - Authorities aim to fully integrate by implementing the agreed reform roadmap to align domestic regulations and laws with EAC protocols, particularly in customs union, common market, and fiscal policies.
  - Authorities agree with staff analysis that EAC accession presents opportunities, challenges, and risks, and in the short run may serve as a catalyst for accelerated reforms.
- Extractives transparency:
  - Authorities are building on progress in creating a robust legal framework by publishing regulations for the Extractive Industries Fiscal Regime Law and the Petroleum Law in the coming months.
  - The Inter-Ministerial Concessions Committee will be empowered to review all draft production sharing agreements (PSAs) before signing.
  - With IMF help, authorities will clarify publication standards for all PSAs.

### Data, statistics, and capacity building
- Commitment to producing reliable and accurate economic and financial data and strengthening capacities of the Somalia National Statistics Bureau (SNBS) and the Central Bank of Somalia.
- Recent progress and planned data activities:
  - In 2023, successfully conducted the Integrated Household Budget Survey and produced their first Poverty and Inequality Report.
  - Plan to produce the first national CPI in 2025 using updated weights.
  - Planning for Somalia’s first population census in 2026 has begun.
  - Preparations for a new agricultural survey are progressing well.
- Acknowledged challenges:
  - Limited coverage and frequency of some economic data.
  - Authorities appreciate IMF support in supplementing data collection and analysis with non-traditional data sources, including satellite imagery and sensor data.

### Conclusion
- Somali authorities remain committed to implementing sound macroeconomic policies while rebuilding economic institutions and regulatory framework.
- Authorities expressed appreciation for the extensive and tailored capacity development and technical assistance provided by the Fund under the Somalia Country Fund.
- They look forward to the Executive Directors’ support in the completion of the 2024 Article IV consultation and the second review under the ECF.

*Source: Excerpt from Somalia Country Report content.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1somea2024002-print-pdf.pdf_