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### National Education Sector Strategic Plan 2022–2026 — Introduction and strategic context
- Somalia experienced significant loss in human capital over two decades of civil strife; education outcomes are among the lowest globally and worse for women.
- Expected years of schooling (2022 Education Sector Analysis): 1.76 years for boys and 1.48 years for girls.
- Public education spending: less than 0.2 percent of GDP; FGS public spending on education represented around 0.16 percent of GDP in 2022.
- External financing and additional domestic revenue mobilization are required to raise education spending and protect fiscal sustainability.
- The National Education Sector Strategic Plan 2022–2026 aims to address barriers to access, quality, and equity.

### National education — key stylized facts and comparative indicators
- Enrollment and attainment
  - Gross primary enrollment (2022 SIHBS): 39 percent.
  - Approximately 65.5 percent of the population lacks any formal education.
  - Fewer than 5 percent have completed secondary education.
  - In nomadic areas, 92.5 percent of the population lacks formal education.
  - Only 45.3 percent of adult women have basic literacy skills, compared to 63.6 percent for adult men.
  - The proportion of girls who complete secondary school is half that of boys.
- Demographics and pressure on the education system
  - Fertility rate (2024 UN estimate): 6 children per woman.
  - Adolescent birth rate: 118 births per 1,000 women aged 15-19 (above the sub-Saharan average of 100).
  - Children under 15: 51.5 percent of the population (2022 SIHBS).
  - Dependency ratio: 114 percent nationally; 131 percent in rural areas; 121 percent in nomadic areas.
  - Average household size: about 7 members.
- Supply-side and quality constraints
  - Public schools account for only 3 percent of primary and 5 percent of secondary schools.
  - Pupil-to-teacher ratios generally below 40, yet the ratio of pupils per qualified teacher exceeds 100 in all Somali schools and reaches nearly 200 in private primary and public secondary schools.
  - Critical shortage of qualified teachers across all school types.
- Barriers to access and gender-specific constraints
  - Main reasons for non-attendance (2022 SIHBS): 42.5 percent due to expensive costs; 14 percent due to limited access to schools.
  - Nearly 19 percent of children do not attend school because of employment or household duties; girls account for more than two-thirds of this group.
  - Child marriage: an estimated 45 percent of girls married before the age of 18 (SNBS, 2006).
  - Among girls aged 15–18, about 9 percent report pregnancy and marital obligations as reasons for not attending school.
  - Legal and enforcement gaps: lack of a clear legal definition for child marriage in the provisional Constitution (2012) and exceptions in the Family Code (1975) allow marriage under 18 in some cases.
- Financing context
  - Somalia receives considerable off-budget partner support for education, but these projects are not centrally monitorable for alignment and impact.
  - Comparative spending: LICs and SSA typically exceed 3 percent of GDP in education spending (UIS, 2022).
  - SDG additional education spending needs estimate: 12.27 percent of 2030 GDP (Carapella et al, 2023).
  - Recent staffing commitment: 2023 budget allowed for the hiring of 3,000 new teachers.

### Economic benefits and modeling approach
- Methodology
  - Static Cobb-Douglas production function: Yt = At Kt^α Lt^(1−α).
  - Effective labor Lt is the sum of female and male effective labor inputs, assumed perfectly substitutable.
  - Education-based human capital uses learning-adjusted years of schooling (LAYS): quantity (expected years of schooling) × quality (relative standardized test scores).
  - Learning-adjusted changes are assumed to take 5 years to become observable.
  - Capital stock estimated via perpetual inventory method assuming 6 percent depreciation rate.
  - Model likely underestimates education impacts because it excludes general equilibrium feedbacks (e.g., adjustments in investment and labor force participation).
  - Peer-country proxies used where Somalia lacks data (standardized test scores, gender-specific hours worked, and sub-Saharan African average returns to education by gender).
- Scenario findings (conservative estimates)
  - Increasing boys’ expected years of schooling from 1.76 to 9.66 and girls' from 1.48 to 7.36 could boost real GDP by 35 percent by 2050.
  - If gender gaps are fully closed so girls also reach 9.66 expected years of schooling, model estimates show real GDP gains close to 40 percent by 2050.
  - Output gains require substantial improvements in girls’ education; without comparable gains for girls, gender gaps may widen under some scenarios.

### Baseline scenario and modeling assumptions
- Baseline holds education level constant at 1.48 expected years of schooling for girls and 1.76 expected years of schooling for boys.
- Real GDP grows at an average rate of 4.3 percent in the baseline.
- Baseline does not account for any growth in human capital; constant case serves as baseline due to Somalia’s fragilities and capacity constraints.
- In scenario evaluations, total factor productivity, capital, and employed population grow at baseline growth rates; only the human capital accumulation component of labor input varies across scenarios.
- Annual hours worked by the average worker by gender are assumed to remain constant.

### Policy scenarios analyzed and quantitative impacts on effective labor and GDP
- Scenarios vary only in expected years of schooling, keeping quality and returns to education at baseline levels:
  - Current policy scenario (ESSP 2022-2026)
    - Assumes thorough and successful implementation by 2026.
    - Boys: 3.96 expected years of schooling.
    - Girls: 3.11 expected years of schooling.
    - Girls’ education attainment relative to boys decreases from 84 percent to 79 percent.
    - Increase in Somalia’s effective labor: 12.7 percent.
    - Average real GDP growth rate under current policy: 4.6 percent.
    - Full implementation of the ESSP would raise Somalia’s real GDP by 8.7 percent relative to baseline by 2050.
  - Ambitious policy — persistent gender gap (2022-2039)
    - Sequential implementations of ESSP until boys’ attainment reaches LHD level; requires 3.6 iterations of the same plan till 2039.
    - Boys: 9.66 expected years of schooling (compared with 9.63 of LHD countries).
    - Girls: 7.36 expected years of schooling.
    - Girls attain 76 percent of the schooling expected for boys.
    - By 2050, overall effective labor input increases by 53.6 percent.
    - Average real GDP growth rate: 5.4 percent.
    - Real GDP in 2050 is 35.1 percent larger compared to the baseline.
  - Ambitious policy — no gender gap (2022-2039)
    - Closes gender gaps and brings both girls and boys to parity at 9.66 expected years of schooling by 2039.
    - Overall effective labor input increases by 59.4 percent.
    - Somalia’s 2050 GDP will be 38.6 percent higher than under the baseline.
    - This is 3.5 percentage points higher than the ambitious policy with persistent gender gaps.
- Comparative schooling gains referenced
  - Total gain in expected years of schooling under the ambitious scenario with persistent gender gaps: 13.8.
  - Extra years required to close gender gaps: 2.3.

### National Education Sector Strategic Plan (ESSP) 2022–2026 — costs and targets
- Estimated ESSP implementation cost: US$387.9 million (about 3.5 percent of GDP) over the five-year period.
- Selected key performance indicators to be achieved by 2026:
  - Increase gross enrollment rate in pre-primary education from zero to 10 percent, with a gender parity index of 1.
  - Raise gross enrollment rates in primary education from 24 to 34 percent for males and from 22 to 28 percent for females.
  - Improve the primary completion rate from 80 percent to 95 percent.
  - Provide 9,000 scholarships (cash grants) for learners in primary schools, with higher focus on girls.
  - Improve the percentage of primary schools with accessible WASH facilities from 10 to 30 percent.
  - In secondary education, increase gross enrollment rates from 26 to 35 percent for males and from 18 to 30 percent for females; increase the gender parity index from 0.68 to 0.8.
  - Provide dignity kits to 137,500 girls (134,000 primary; 3,500 secondary) and an extra 1,000 to girls in emergency-affected schools.
  - Raise the national literacy rate from 40 to 45 percent via adult education.
  - Raise enrollment in public Technical and Vocational Education centers from 8,701 to 30,000, ensuring 50 percent female participation.
  - Expand higher education enrollment from 94,500 to 300,000, with females constituting 50 percent.
  - Double Somali National University Campuses constructed and/or rehabilitated to six.

### Policy priorities and recommendations (education)
- Resource mobilization and fiscal strategy
  - Gradually increase education spending by mobilizing domestic revenues and external resources, with attention to fiscal sustainability.
  - Improve monitoring and coordination of off-budget external education projects to align with national priorities.
- Efficiency and institutional coordination
  - Enhance coordination between the Federal Government of Somalia (FGS) and the Federal Member States (FMS).
  - Leverage diversity of education providers (public, private, community) to expand access efficiently.
  - Balance recurrent and capital spending to ensure sustainable expansion of education services.
- Quality and teacher workforce
  - Recruit teachers with adequate skills and invest in teacher training programs.
  - Prioritize expanding the pool of female teachers to incentivize girls’ enrollment.
  - Preliminary data: about 15 percent of teachers recruited in 2023 were female.
- Gender and protective measures
  - Implement gender mainstreaming and gender-responsive budgeting in education.
  - Consider enacting clear legislation prohibiting child marriage and strengthen enforcement and awareness mechanisms.
  - Invest in school infrastructure that addresses girls’ needs (for example, separate sanitary facilities).
- Short-term priorities given limited resources
  - Prioritize policies that deliver near-term wins while building the foundations of a public education system.
  - Targeted interventions to reduce direct costs to households, expand access in rural and nomadic areas, and reduce barriers linked to child labor and caregiving responsibilities.
- Governance and fiscal federalism
  - Advance fiscal federalism reforms to define education spending and revenue responsibilities between the FGS and FMS; improve collaboration, transparency, financial data sharing, and budget management.
- Broader reforms
  - Eradicate child marriage to close gender gaps in secondary education and increase female labor force participation; potential GDP gains from this reform could surpass projections from the static framework.
  - Consider establishing a Gender Budgeting Unit or Gender Monitoring Office to prevent inadvertent exacerbation of gender disparities (ESSP widens gap unless addressed).

### Somalia’s accession to the East African Community (EAC) — background and integration process
- Somalia was admitted as a full member of the EAC on November 24, 2023; the Federal Parliament of Somalia ratified the Treaty of Accession in February 2024, and the instrument of ratification was deposited with the EAC Secretary General on March 4, 2024.
- The EAC market comprises an estimated 302 million people and a GDP of approximately US$345 billion as of 2023.
- The EAC is a de jure customs union and a de jure common market; the EAC aims to establish a monetary union with a current target date of 2031.
- FGS and EAC Secretariat prepared an ambitious roadmap for Somalia’s integration, including alignment of national laws, regulations, and administrative guidelines.
- Authorities plan to initiate full participation in EAC legislative and judicial bodies by appointing nine members to the East African Legislative Assembly (EALA) and a member to the East African Court of Justice (EACJ).

### Opportunities from EAC accession
- Fiscal and customs modernization
  - Integration into the EAC customs union can incentivize modernization and harmonization of the customs regime and boost Somalia’s fiscal position.
  - Somalia has built infrastructure for collecting domestic revenues since 2013; domestic revenues are close to 3 percent of GDP.
  - Including external grants, Somalia’s revenue-to-GDP ratio was 6 percent in 2023, one of the lowest in the EAC.
  - Alignment to invoice-value customs valuation and harmonization across major ports is expected to significantly increase customs revenues.
- Trade and growth
  - Accession provides expanded access to an integrated market, which could boost export potential and attract investment.
  - Somalia’s exports to EAC Partner States: approximately $0.8 million in 2022 and $0.75 million in 2023; livestock represented the primary export product.
  - Realizing trade benefits will require adequate transport infrastructure, structured and regulated cross-border markets, and structural reforms to enhance productivity.
- Foreign direct investment (FDI)
  - Accession could make Somalia more attractive for FDI by creating a more stable and predictable economic environment through harmonized policies.
- Institutional development and regional projects
  - EAC alignment requirements can accelerate reforms in judiciary and governance.
  - Membership could improve road and transportation systems, lower unit electricity prices, and support human capital through regional projects and scholarships.
- Financial sector integration
  - Somalia could benefit from EAC Financial Sector Development and Regionalization Project (EAC-FSDRP) and the East African Payments System (EAPS).

### Challenges, risks, and fiscal considerations of EAC integration
- Coordination and regulatory alignment
  - National-level integration requires agreement between FGS and FMS on labor and capital mobility, tariff rates, and valuations.
  - Disparities in regulatory practices between FGS and FMS complicate establishing a cohesive national framework.
- Capacity constraints and resistance to change
  - Limited human capital, weak financial development, and lack of technical resources could hinder development and enforcement of policies needed for full integration.
- Macroeconomic stability and vulnerability
  - Maintaining macroeconomic stability (low inflation, prudent fiscal deficits, sustainable public debt) is crucial.
  - Somalia currently has one of the lowest inflation rates and fiscal deficits within the EAC, and the lowest government debt ratio following HIPC Completion Point in December 2023.
  - Somalia remains highly vulnerable to natural and external shocks, complicating stability.
- Risks from joining the EAC
  - Fiscal impact of tariff removals is expected to be limited due to high informality; most imports from EAC Partner States enter through porous land borders, especially from Kenya (95 percent of imports in 2022).
  - Loss of revenue from lower tariffs on these imports is likely to be more than compensated by increased revenue from the common external tariff (CET) on non-EAC imports.
  - Potential negative revenue impact from reduced customs duties on Khat imports from Kenya and elimination of visa fees under freedom of movement.
  - Freedom of movement increases the risk of security spillovers; less regulated flow of people could increase regional security spillovers.
  - Participation risks widening trade imbalances skewed in favor of other EAC Partner States due to nascent industry, weak agricultural sector, and low human capital.

### Mitigating EAC accession risks — policy recommendations and measures
- Structural reforms to enhance competitiveness
  - Undertake structural reforms to increase productivity and avoid becoming a consumption hub for EAC exports; concentrate on comparative advantage in the near-term.
- Regional security coordination
  - Coordinate with Partner States on security issues under the EAC’s Regional Strategy for Peace and Security to mitigate security spillovers.
- Phased tariff integration
  - Consider gradual, phased approach to eliminate intra-EAC tariffs; negotiate sensitive/excluded items and use Article 7 principle of variable geometry for staggered integration.
- Capacity building and communication
  - Commit to sustained institutional reform and targeted investment in technical assistance and capacity-building initiatives.
  - Communicate benefits and mitigation actions to stakeholders.
- Macroeconomic resilience
  - Continue building resilience against climate shocks, strengthen tax capacity, and reduce import dependence; create fiscal space and improve public spending efficiency.
- Use EAC membership to strengthen FGS–FMS relations
  - Leverage EAC access to domestic markets and regional projects to incentivize FMS collaboration with FGS and harmonization of laws and administrative guidelines.

### Harnessing satellite data for economic monitoring in fragile states — rationale and IMF approach
- Rationale
  - Lack of adequate and timely data is a critical obstacle in policy design in fragile and conflict-affected states (FCS); Somalia has limited geographical coverage of official data.
- IMF approach
  - The IMF has been exploring remote sensing and non-traditional data sources (satellite imagery, sensor data) to enhance coverage, accuracy, and granularity of economic analysis.

### Satellite imagery — monitoring vegetation (proxy for agricultural production)
- Key advantages
  - High frequency, short time lag, and extensive geographical coverage.
  - Short time-lag: "5 days" (Sentinel-2 high revisit frequency at the Equator in cloud-free conditions).
  - Images available from "2016-present" and accessible via the Google Earth Engine in near real-time.
- Vegetation index methodology
  - Land cover data, averaged over multiple years, is used to identify cultivated areas.
  - Normalized Difference Vegetation Index (NDVI) formula: NDVI = (NIR – Red)/ (NIR + Red).
  - NDVI values range from "-1 to 1", with values closer to "1" indicating healthy vegetation, "0" representing bare soil or water, and values near "-1" signifying non-vegetative surfaces.
- Empirical findings for Somalia
  - Vegetation indexes clearly captured the impact of the drought in "2021-2022" and the recovery when rains resumed in "2023".
  - As a proxy for agriculture production, the indicator suggested that GDP and exports weakened during "2021-2022" and started to recover in "2023".

### Satellite imagery — nightlights and landcover (proxy for urbanization and development)
- Data and resolution
  - Nightlights data source: VIIRS Day Night Band (DNB) on JPSS satellites.
  - VIIRS data accessible from the Google Earth Engine from "2012-onwards", at a "100-meter resolution".
- Somalia-specific findings
  - Mogadishu ranks second in total area covered by high night pollution and has experienced rapid urbanization since "2016".
  - High nightlight pollution area threshold: average luminosity intensity greater than the mid-point of "3.5".
  - UN: "45 percent" of population lived in urban areas as of "2018" with an annual growth rate of "4.23 percent".
- Policy relevance
  - Combining nightlights with landcover data highlights peri-urban development and can inform energy and infrastructure planning.

### Sensor data — AIS/PortWatch for trade monitoring and shipping
- Data sources and coverage
  - IMF PortWatch and AIS satellite data produce timely indicators for "1648 ports" and "24 major maritime passages".
  - For Somalia, PortWatch covers Mogadishu, Berbera, Bossaso and Kismayo; an ad-hoc AIS dataset was derived for Garacad.
  - AIS mandatory for ships above "300 gross tons".
- Somalia-specific findings and port statistics
  - Official trade estimates historically inferred from Mogadishu data only; starting in "2024" official estimates were upgraded using PortWatch shares.
  - Customs data (SOMCAS) for Mogadishu: "95 percent" of merchandise imports take place by sea.
  - Early "2024" findings: trade into Mogadishu through the Red Sea was steady despite regional security risks, but navigation time increased.
  - Since mid-December "2023" attacks in the Red Sea caused a sharp drop in traffic through Bab al-Mandab and Suez Canal, affecting regional flows.
  - Bilateral delivery time increases to Mogadishu: Türkiye "+14 days", Egypt "+5 days", Oman and Saudi Arabia "+3 days".
  - Customs collections in Mogadishu showed a temporary impact from delays and have since recovered.
  - AIS-derived livestock carrier estimates indicate a surge in livestock exports (in metric tons) at the beginning of "2023" that has been sustained; shipments depart mostly through Bossaso to Saudi Arabia.
  - March "2023" lifting of the partial livestock ban by Saudi Arabia is linked to the jump in exports.
  - Despite Red Sea security risks, AIS-derived export volume remained robust in "2024H1".
  - Average port calls: Mogadishu "240", Berbera "335", Bossaso "84".
  - In terms of volume, Mogadishu port receives "8 percent" more than Berbera.
  - Vessel activity has been picking up in Garacad Seaport since late "2021".
- Policy relevance
  - High-frequency AIS/PortWatch data help assess sensitivity to regional disruptions, anticipate fluctuations in customs revenues, monitor balance of payments developments, and inform customs modernization and EAC integration efforts.

### Sensor data — flights and passenger movements
- Methodology
  - Passenger capacity estimates derived from aircraft sensors by linking aircraft models to seating capacity.
- Somalia-specific findings
  - International routes tripled from "7 routes in 2019" to "23 in 2024".
  - Aden Adde (Mogadishu) accounts for "61 percent" of overall passenger capacity from international flights; Hargeisa Egal airport accounts for "33 percent".
  - Domestic passenger capacity for "2024" up to August is already "12 percent" higher than the total for "2023".
- Policy relevance
  - Flight information is useful for surveillance of flight disruptions, monitoring tourism recovery, anticipating external balance implications, and increasing revenues from overflight fees.

### Data integration, capacity building, and institutional recommendations
- Complementarity and recent improvements
  - Satellite imagery and sensor-derived indicators can complement official data by filling gaps, improving geographic coverage, and providing timely indicators.
  - Somalia has improved its statistical system, data reporting, and transparency, with upcoming developments including GDP by production, the first census in "40 years", and a new agricultural census.
- Institutional recommendations
  - As statistical capacity strengthens, nowcasting of economic and trade activity can be explored further with IMF support.
  - Somali authorities are encouraged to continue engagement with the IMF and other international organizations to leverage non-traditional data sources.
  - The IMF Big Data Center plans to expand interactions with member countries to maximize the value of Big Data for macroeconomic, macro-fiscal, and financial market surveillance and statistical capacity building.

### Pension scheme — eligibility, benefits, and financing dynamics
- Eligibility and retirement age
  - Eligibility for a benefit is based on age and employment records.
  - The Act sets the normal retirement age at 65 for both men and women.
  - Life expectancy at 65 is 12.5 years for men and 13.5 years for women, according to UN population projections.
  - Early retirement of no more than 60 months (5 years) is possible, with an early retirement penalty of 0.5 percent per month.
  - Deferred (late) retirement is not permitted.
- Contribution rate and scenarios
  - The contribution rate is 10 percent, equally shared by employees and the government, as employer.
  - Scenario: Increasing the total contribution rate to 15 percent from 2030 onwards would make the scheme’s cashflows positive until around 2075, and reserves ensuring liquidity for several years afterwards.
  - Projection: From the early 2050s, the scheme’s contribution revenues will only cover approximately 2/3 of the benefit expenditures.
- Benefits structure and indexing
  - Benefits paid as a monthly pension for people with at least 10 years of work history in pensionable positions, or as a gratuity for shorter service periods.
  - Old age pensions calculated on career average basic wages using a 1.5 percent accrual rate, resulting in a minimum replacement rate of 15 percent.
  - Pension benefits are subject to a 75 percent maximum replacement rate.
  - Past wages counting towards the pension formula are valorized in line with wages while benefits in payment are indexed to prices.
- Workers with less than 10 years of service
  - Lump-sum gratuity equal to one month of average (valorized) wage for every year of service.
  - If retiring between ages 50 and 59 with less than 10 years of service, the lump-sum is reduced by 10 percent.
  - If retiring between ages 40 and 49 with less than 10 years of service, the lump-sum is reduced by 20 percent.
  - If re-joining civil service and total service time exceeds 10 years, they may become eligible for an annuity provided they repay the lumpsum collected earlier.
- Service time and past records
  - Service time and wage histories since 2007 have been recorded and serve as the basis for eligibility and pension calculations for the past 18 years.
  - Due to lack of records before 2007, age (birth year) is used to estimate pre-2007 service years.
  - Age-dependent recognition grants a service history of 30 years to everyone with uninterrupted work record since 2007, translating into a 45 percent replacement rate.
  - Recognition of past service time is irrespective of no prior contributions, immediately creating pension liabilities and benefit payment obligations towards civil servants 65 years or older.
- Disability and survivor benefits
  - Disability benefits: eligibility conditioned on total incapacity to work; benefits calculated same as old age pensions.
  - Survivor pensions: available to spouses (until re-marriage), sons up to age 18, daughters until marriage without age limit, and to parents who can prove reliance on the deceased member’s earnings.
  - Survivor benefit amounts: 50 percent of the originating pension in case of a single survivor and 70 percent in case of more survivors, divided among all claimants; the number of survivors cannot increase the total periodic benefit above 70 percent.
  - The law recognizes both legal and “customary” marriages, i.e., cohabiting with more than one female spouse.
- Institutional framework and governance
  - Pension and Gratuity Fund governed by the Pension and Gratuity Oversight Committee (PGOC), an independent agency reporting directly to the President.
  - PGOC will operate with 5 voting members, including the Minister of Finance, Minister of Labor, a representative of civil service trade unions, and a representative of the National Civil Service Commission.
  - Day-to-day operation rests with the Pension and Gratuity Directorate (PGD): contribution collections, investment of reserves, record keeping, assessing eligibility, and paying pensions.
  - PGOC tasked with preparing triannual actuarial assessments and long-term projections every five years; the Act is unclear on differences in scope and consequences of these reports.
- Fiscal and welfare implications; scheme financing dynamics
  - The scheme is a defined benefit plan financed on a pay-as-you-go basis; it will start paying benefits immediately and recognize past service histories with no prior contributions, causing it to mature faster and create unfunded liabilities.
  - Contribution rate of 10 percent over basic salary falls short of the equilibrium level needed for long-term self-sufficiency.
  - Initially current revenues will slightly exceed expenditures and a reserve fund will accumulate; reserves projected to disappear starting in the early 2030s.
  - Scheme’s cash flows will turn negative around 2035, with reserves fully depleted within 25 years of launch; from that point onward the scheme will require budget subsidies to maintain liquidity.
- Constraints on contribution rate increases
  - (1) Severe constraints on fiscal resources do not allow for higher levies; higher employer contributions increase the wage bill and may require compensating outlays.
  - (2) Reserves need safe, liquid, transparently priced instruments earning positive real returns; such instruments do not exist in Somalia, risking reserves financing public debt or illiquid assets.
  - Given these constraints, contribution rates will need to be gradually increased over time.
- Implementation issues, uncertainties, and risks
  - Main fiscal uncertainties and risks:
    - (1) Government’s ability to keep temporary workers out of the new scheme permanently.
    - (2) Impact of pay and grade reforms and human resource policies; clarity on the proposed wage bill is needed to revise projections.
    - (3) Number and age structure of eligible survivors; no public information collected on potential survivors.
    - (4) Placement and returns of reserves expected to accumulate (then decumulate) in the next 25-30 years; limited near-term investment opportunities.
  - Recommended preparatory actions:
    - Precede application of the Act with a fiscal impact assessment informed by planned civil service pay and grade reform and a realistic implementation plan.
    - Update financial projections once details of planned civil service pay reform are known.
    - Implementation plan should cover establishment of the Pension and Gratuity Directorate, the Oversight Committee, and the Pension and Gratuity Fund with detailed estimates of operating costs and initial investments and assessment of technical and financial assistance needs.

*Italic: Summary based on content extracted from "1somea2024003-print-pdf".*

### 1. National Education Sector Strategic Plan 2022–2026 _______________________________ 13

### National Education Sector Strategic Plan 2022–2026

### Introduction and Strategic Context
- Somalia experienced significant loss in human capital over two decades of civil strife; education outcomes are among the lowest globally and worse for women.
- Expected years of schooling (2022 Education Sector Analysis): 1.76 years for boys and 1.48 years for girls.
- Public education spending: less than 0.2 percent of GDP; FGS public spending on education represented around 0.16 percent of GDP in 2022.
- External financing and additional domestic revenue mobilization are required to raise education spending and protect fiscal sustainability.
- The National Education Sector Strategic Plan 2022–2026 aims to address barriers to access, quality, and equity.

### Key Stylized Facts and Comparative Indicators
- Enrollment and attainment
  - Gross primary enrollment (2022 SIHBS): 39 percent.
  - Approximately 65.5 percent of the population lacks any formal education.
  - Fewer than 5 percent have completed secondary education.
  - In nomadic areas, 92.5 percent of the population lacks formal education.
  - Only 45.3 percent of adult women have basic literacy skills, compared to 63.6 percent for adult men.
  - The proportion of girls who complete secondary school is half that of boys.
- Demographics and pressure on the education system
  - Fertility rate (2024 UN estimate): 6 children per woman.
  - Adolescent birth rate: 118 births per 1,000 women aged 15-19 (above the sub-Saharan average of 100).
  - Children under 15: 51.5 percent of the population (2022 SIHBS).
  - Dependency ratio: 114 percent nationally; 131 percent in rural areas; 121 percent in nomadic areas.
  - Average household size: about 7 members.
- Supply-side and quality constraints
  - Public schools account for only 3 percent of primary and 5 percent of secondary schools.
  - Pupil-to-teacher ratios generally below 40, yet the ratio of pupils per qualified teacher exceeds 100 in all Somali schools and reaches nearly 200 in private primary and public secondary schools.
  - Critical shortage of qualified teachers across all school types.
- Barriers to access and gender-specific constraints
  - Main reasons for non-attendance (2022 SIHBS): 42.5 percent due to expensive costs; 14 percent due to limited access to schools.
  - Nearly 19 percent of children do not attend school because of employment or household duties; girls account for more than two-thirds of this group.
  - Child marriage: an estimated 45 percent of girls married before the age of 18 (SNBS, 2006).
  - Among girls aged 15–18, about 9 percent report pregnancy and marital obligations as reasons for not attending school.
  - Legal and enforcement gaps: lack of a clear legal definition for child marriage in the provisional Constitution (2012) and exceptions in the Family Code (1975) allow marriage under 18 in some cases.
- Financing context
  - Somalia receives considerable off-budget partner support for education, but these projects are not centrally monitorable for alignment and impact.
  - Comparative spending: LICs and SSA typically exceed 3 percent of GDP in education spending (UIS, 2022).
  - SDG additional education spending needs estimate: 12.27 percent of 2030 GDP (Carapella et al, 2023).
  - Recent staffing commitment: 2023 budget allowed for the hiring of 3,000 new teachers.

### Economic Benefits and Modeling Approach
- Methodology
  - A static Cobb-Douglas production function is used: Yt = At Kt^α Lt^(1−α).
  - Effective labor Lt is the sum of female and male effective labor inputs, assumed perfectly substitutable.
  - Education-based human capital uses learning-adjusted years of schooling (LAYS) per Filmer et al. (2020): quantity (expected years of schooling) × quality (relative standardized test scores).
  - Learning-adjusted changes are assumed to take 5 years to become observable.
  - Capital stock estimated via perpetual inventory method assuming 6 percent depreciation rate.
  - Model likely underestimates education impacts because it excludes general equilibrium feedbacks (e.g., adjustments in investment and labor force participation).
  - Peer-country proxies used where Somalia lacks data (standardized test scores, gender-specific hours worked, and sub-Saharan African average returns to education by gender).
- Scenario findings (conservative estimates)
  - Increasing boys’ expected years of schooling from 1.76 to match the average of 9.66 in Low Human Development (LHD) countries, while raising girls' expected years of schooling from 1.48 to 7.36 (same relative pace as current policy), could boost real GDP by 35 percent by 2050.
  - If, in addition to the above, gender gaps in education are fully closed so that girls also reach 9.66 expected years of schooling, model estimates show real GDP gains would reach close to 40 percent by 2050.
  - The analysis underscores that output gains require substantial improvements in girls’ education; without comparable gains for girls, gender gaps may widen under some scenarios.

### Policy Priorities and Recommendations
- Resource mobilization and fiscal strategy
  - Gradually increase education spending by mobilizing domestic revenues and external resources, with attention to fiscal sustainability.
  - Improve monitoring and coordination of off-budget external education projects to align with national priorities.
- Efficiency and institutional coordination
  - Enhance coordination between the Federal Government of Somalia (FGS) and the Federal Member States (FMS).
  - Leverage the diversity of education providers (public, private, community) to expand access efficiently.
  - Balance recurrent and capital spending to ensure sustainable expansion of education services.
- Quality and teacher workforce
  - Recruit teachers with adequate skills and invest in teacher training programs.
  - Prioritize expanding the pool of female teachers to incentivize girls’ enrollment.
- Gender and protective measures
  - Implement gender mainstreaming and gender-responsive budgeting in education.
  - Consider enacting clear legislation prohibiting child marriage and strengthen enforcement and awareness mechanisms.
  - Invest in school infrastructure that addresses girls’ needs (for example, separate sanitary facilities).
- Short-term priorities given limited resources
  - Prioritize policies that deliver near-term wins while building the foundations of a public education system.
  - Targeted interventions to reduce direct costs to households, expand access in rural and nomadic areas, and reduce barriers linked to child labor and caregiving responsibilities.

*Italic: Summary based on "National Education Sector Strategic Plan 2022–2026" content in the supplied IMF chapter.*

### 14.      The baseline scenario represents the path for Somalia’s economy in the absence of any

### 1somea2024003-print-pdf - 14.      The baseline scenario represents the path for Somalia’s economy in the absence of any

### Baseline scenario and modeling assumptions
- Baseline holds education level constant at 1.48 expected years of schooling for girls and 1.76 expected years of schooling for boys.
- Real GDP grows at an average rate of 4.3 percent in the baseline.
- Baseline does not account for any growth in human capital; constant case serves as baseline due to Somalia’s fragilities and capacity constraints.
- In evaluating scenarios, total factor productivity, capital, and employed population grow at baseline growth rates; only the human capital accumulation component of labor input varies across scenarios.
- Annual hours worked by the average worker by gender are assumed to remain constant.

### Policy scenarios analyzed
- Three scenarios vary only in expected years of schooling (unevenly for boys and girls), keeping quality and returns to education at baseline levels:
  - Current policy scenario (ESSP 2022-2026)
    - Assumes thorough and successful implementation by 2026.
    - Boys: 3.96 expected years of schooling.
    - Girls: 3.11 expected years of schooling.
    - Girls’ education attainment relative to boys decreases from 84 percent to 79 percent.
  - Ambitious policy — persistent gender gap (2022-2039)
    - Sequential implementations of ESSP until boys’ attainment reaches Low Human Development (LHD) countries’ level.
    - Requires 3.6 iterations of the same plan till 2039.
    - Boys: 9.66 expected years of schooling (compared with 9.63 of LHD countries).
    - Girls: 7.36 expected years of schooling.
    - Girls attain 76 percent of the schooling expected for boys.
  - Ambitious policy — no gender gap (2022-2039)
    - Closes gender gaps and brings both girls and boys to parity at 9.66 expected years of schooling by 2039.

### Quantitative impacts on effective labor and GDP (key statistics)
- Current policy (ESSP 2022-2026)
  - Increase in Somalia’s effective labor: 12.7 percent.
  - Average real GDP growth rate under current policy: 4.6 percent.
  - Full implementation of the ESSP would raise Somalia’s real GDP by 8.7 percent relative to baseline by 2050.
- Ambitious policy — persistent gender gap (2022-2039)
  - By 2050, overall effective labor input increases by 53.6 percent.
  - Average real GDP growth rate: 5.4 percent.
  - Real GDP in 2050 is 35.1 percent larger compared to the baseline.
- Ambitious policy — no gender gap (2022-2039)
  - Overall effective labor input increases by 59.4 percent.
  - Somalia’s 2050 GDP will be 38.6 percent higher than under the baseline.
  - This is 3.5 percentage points higher than the ambitious policy with persistent gender gaps.
- Comparative schooling gains referenced
  - Total gain in expected years of schooling under the ambitious scenario with persistent gender gaps: 13.8.
  - Extra years required to close gender gaps: 2.3.

### National Education Sector Strategic Plan (ESSP) 2022–2026 — costs and targets
- Estimated ESSP implementation cost: US$387.9 million (about 3.5 percent of GDP) over the five-year period.
- Selected key performance indicators to be achieved by 2026:
  - Increase gross enrollment rate in pre-primary education from zero to 10 percent, with a gender parity index of 1.
  - Raise gross enrollment rates in primary education from 24 to 34 percent for males and from 22 to 28 percent for females.
  - Improve the primary completion rate from 80 percent to 95 percent.
  - Provide 9,000 scholarships (cash grants) for learners in primary schools, with higher focus on girls.
  - Improve the percentage of primary schools with accessible WASH facilities from 10 to 30 percent.
  - In secondary education, increase gross enrollment rates from 26 to 35 percent for males and from 18 to 30 percent for females; increase the gender parity index from 0.68 to 0.8.
  - Provide dignity kits to 137,500 girls (134,000 primary; 3,500 secondary) and an extra 1,000 to girls in emergency-affected schools.
  - Raise the national literacy rate from 40 to 45 percent via adult education.
  - Raise enrollment in public Technical and Vocational Education centers from 8,701 to 30,000, ensuring 50 percent female participation.
  - Expand higher education enrollment from 94,500 to 300,000, with females constituting 50 percent.
  - Double Somali National University Campuses constructed and/or rehabilitated to six.

### Policy priorities and recommendations
- Mobilize additional resources for the sector and make room in the budget by mobilizing domestic revenues; continued financial and technical support from development partners is critical.
- Channel partner support gradually through the budget and country systems to align with government priorities and improve monitoring and evaluation.
- Leverage diversity of education providers and provide school grants to lower household costs; strengthen standards and regulations for existing providers and build MoECHE capacity.
- Improve teaching quality by recruiting teachers with adequate skills and investing in teacher training programs; expand the pool of female teachers.
  - Preliminary data: about 15 percent of teachers recruited in 2023 were female.
- Balance recurrent and capital spending: tailor educational infrastructure to meet needs of girls and women (including sanitary facilities) and consider nomadic households’ access.
- Advance fiscal federalism reforms to define education spending and revenue responsibilities between the FGS and FMS; improve collaboration, transparency, financial data sharing, and budget management.
- Eradicate child marriage to close gender gaps in secondary education and increase female labor force participation; potential GDP gains from this reform could surpass projections from the static framework.
- Implement gender mainstreaming and budgeting to ensure equal access for girls and boys; consider establishing Gender Budgeting Unit or Gender Monitoring Office to prevent inadvertent exacerbation of gender disparities (ESSP widens gap unless addressed).

*Sources: Somalia authorities; IMF staff estimates; Box 1: National Education Sector Strategic Plan 2022–2026 and IMF analysis*

### 1. In March 2024, Somalia joined the East African Community (EAC), a regional economic

### 1. In March 2024, Somalia joined the East African Community (EAC), a regional economic community established in 1999 that comprises eight countries: Kenya, Tanzania, Rwanda, Burundi, Uganda, South Sudan, Democratic Republic of Congo, and now, Somalia.

### Background and integration process
- Somalia was admitted as a full member of the EAC on November 24, 2023; the Federal Parliament of Somalia ratified the Treaty of Accession in February 2024, and the instrument of ratification was deposited with the EAC Secretary General on March 4, 2024, making Somalia officially the eighth Partner State of the EAC.
- The EAC aims to broaden and deepen economic, political, social, and cultural integration to improve quality of life through increased competitiveness, value-added production, trade, and investment.
- The EAC market comprises an estimated 302 million people and a GDP of approximately US$345 billion as of 2023.
- The EAC is a de jure customs union (duty-free intra-EAC trade and a common external tariff) and a de jure common market (Partner States required to ensure free movement of labor and capital).
- The EAC aims to establish a monetary union with a current target date of 2031. In 2022, the target date for the East African Monetary Union (EAMU) was postponed from 2024 to 2031.
- Given the long-term nature of monetary union and confederation goals, the paper focuses on Somalia’s near- to medium-term engagement in the customs union and common market.
- Upon acceptance into the EAC, integration is gradual; Partner States are at different levels of integration, especially for the customs union and common market.
- The FGS and EAC Secretariat jointly prepared an ambitious roadmap for Somalia’s integration, outlining alignment of national laws, regulations, and administrative guidelines with the EAC legal and regulatory framework.
- Authorities plan to initiate full participation in EAC legislative and judicial bodies by appointing nine members to the East African Legislative Assembly (EALA) and a member to the East African Court of Justice (EACJ).

### Opportunities for Somalia from EAC accession
- Fiscal and customs modernization
  - Integration into the EAC customs union can incentivize modernization and harmonization of the customs regime and boost Somalia’s fiscal position.
  - Somalia has built infrastructure for collecting domestic revenues since 2013; domestic revenues are close to 3 percent of GDP.
  - Including external grants, Somalia’s revenue-to-GDP ratio was 6 percent in 2023, one of the lowest in the EAC.
  - As an EAC member, Somalia will be expected to collect ad valorem customs duties on imports from outside the union based on invoice values at ports; aligning valuations (to invoice value) and harmonizing customs across all major ports is expected to significantly increase customs revenues.
- Trade and growth
  - Accession provides expanded access to a larger integrated market, which could boost export potential and attract investment.
  - Reduction of tariff and non-tariff barriers within the EAC will facilitate the movement of goods and services, expanding Somalia’s export market and supporting export diversification.
  - Somalia’s exports to EAC Partner States: approximately $0.8 million in 2022 and $0.75 million in 2023; livestock represented the primary export product.
  - Realizing trade benefits will require adequate transport infrastructure, structured and regulated cross-border markets, and structural reforms to enhance productivity.
  - Membership could provide access to regional infrastructure projects and harmonization of trade policies to enhance connectivity, lower transportation costs, and improve trade efficiency.
- Foreign direct investment (FDI)
  - Accession could make Somalia a more attractive destination for FDI by creating a more stable and predictable economic environment through harmonized policies and reduced barriers to entry, stimulating growth via capital, technology transfer, and employment.
- Institutional development
  - EAC alignment requirements can accelerate reforms in judiciary and governance (e.g., establishment of court systems capable of adjudicating across Partner States).
  - Convergence goals and experiences of other Partner States can be used to accelerate development of state institutions and civic infrastructure.
- Regional projects and human capital
  - Somalia’s underdeveloped road and transportation systems, high unit price for electricity, and low World Bank HDI ranking could be improved through EAC regional infrastructure and social projects (examples include oil and gas pipeline projects, six existing road development projects, and educational scholarships at the EAC Regional Centre of Excellence for Vaccines, Immunization, and Health Supply Chain Management).
- Financial sector integration
  - Somalia could benefit from the EAC Financial Sector Development and Regionalization Project (EAC-FSDRP) and leverage the East African Payments System (EAPS) to enhance cross-border financial transactions, reduce transaction costs, and facilitate financial inclusion.
  - Harmonization of financial laws and regulations across the EAC would provide a more robust regulatory framework and enable Somali financial institutions to operate regionally.

### Challenges to integration
- Federal government (FGS) and Federal Member States (FMS) coordination
  - National-level integration into customs union and common market requires agreement between FGS and FMS; reaching agreement on labor and capital mobility, tariff rates, and valuations can be challenging.
- Regulatory alignment
  - Disparities in regulatory practices between FGS and FMS complicate establishing a cohesive national framework; political consensus is needed to harmonize laws, regulations, and administrative guidelines.
- Capacity constraints and resistance to change
  - Limited human capital, weak financial development, and lack of technical resources in FGS and FMS could hinder development and enforcement of policies needed for full integration.
  - Potential resistance to changes required by the integration roadmap can hamper efforts.
- Macroeconomic stability and vulnerability
  - Maintaining macroeconomic stability (low inflation, prudent fiscal deficits, sustainable public debt) is crucial to benefit from integration.
  - Somalia currently has one of the lowest inflation rates and fiscal deficits within the EAC, and the lowest government debt ratio following the achievement of the HIPC Completion Point in December 2023.
  - Somalia remains highly vulnerable to natural and external shocks (natural disasters, supply chain disruptions, security issues), which complicates stability.
  - Increased labor and capital mobility could lead to capital flight and labor migration to more stable Partner States, potentially hurting competitiveness of Somali exports.
  - Greater trade openness within the EAC could increase vulnerability to external shocks (e.g., sharp declines in commodity prices) that can propagate across the region.

### Risks from joining the EAC
- Fiscal impact of tariff removals
  - Negative fiscal impact from tariff removals is expected to be limited due to high informality in Somalia’s trade with EAC partners; most imports from EAC Partner States enter through porous land borders, especially from Kenya (95 percent of imports in 2022).
  - Loss of revenue from lower tariffs on these imports is likely to be more than compensated by increased revenue from the common external tariff (CET) and corresponding valuation base imposed on imports from non-EAC states.
  - Potential negative revenue impact from reduced customs duties on Khat imports from Kenya and elimination of visa fees under freedom of movement.
- Security spillovers
  - Freedom of movement increases the risk of spillover of security threats; despite progress against al-Shabab, Somalia’s security situation remains challenging, and less regulated flow of people could increase regional security spillovers.
- Widening trade imbalances
  - Participation risks widening trade imbalances skewed in favor of other EAC Partner States due to nascent industry, weak agricultural sector, and low human capital, enabling more developed Partner States to dominate trade relations.

### Mitigating the risks of EAC accession (policy recommendations and measures)
- Structural reforms to enhance competitiveness
  - Undertake structural reforms to increase productivity and competitiveness of domestic producers to avoid becoming a consumption hub for EAC exports.
  - Concentrate on comparative advantage in the near-term and develop human and physical capital over the medium-term, supported by potential FDI inflows from improved investor confidence.
- Regional security coordination
  - Coordinate with Partner States on security issues under the EAC’s Regional Strategy for Peace and Security to mitigate security spillovers.
- Phased tariff integration
  - Consider a gradual, phased approach to eliminate intra-EAC tariffs to minimize small expected negative fiscal impacts.
  - There is scope to negotiate gradual reduction of tariffs and precedents exist (Tanzania and Uganda negotiated gradual removal of tariffs with Kenya over a number of years).
  - Article 7 principle of variable geometry allows Partner States to integrate at varying speeds across different dimensions; Somalia will likely undergo protracted discussions and negotiations with the EAC on tariff arrangements.
  - Authorities can negotiate for certain items to be marked as sensitive or excluded, allowing intra-EAC duties to remain on them in some form.
- Capacity building and communication
  - Commit to sustained institutional reform and targeted investment in technical assistance and capacity-building initiatives to implement the integration roadmap.
  - Effectively communicate benefits of joining the EAC to stakeholders and actions to mitigate risks.
- Macroeconomic resilience
  - Continue building resilience against climate shocks, strengthen tax capacity, and reduce import dependence.
  - Climate change adaptation requires substantial investments in infrastructure, human capital, and agriculture.
  - To maintain buffers against shocks in the medium- to long-term, create fiscal space, improve public spending efficiency, and seek financial and technical assistance from international partners.
- Use EAC membership to strengthen FGS–FMS relations
  - Leverage EAC access to domestic markets and regional projects to incentivize FMS collaboration with FGS and harmonization of laws, regulations, and administrative guidelines.

### Harnessing satellite data for economic monitoring in fragile states (application to Somalia)
- Rationale
  - Lack of adequate and timely data is a critical obstacle in policy design in fragile and conflict-affected states (FCS); adequacy depends on coverage, accuracy, reliability, periodicity, and timeliness.
  - Somalia has made progress in strengthening macroeconomic statistics with IMF capacity development support, but limited geographical coverage of official data constrains comprehensive and timely assessments of economic developments, climate shocks, and other events.
- IMF approach
  - The IMF has been exploring remote sensing and non-traditional data sources to address data shortcomings.
  - Satellite imagery and sensor data can enhance coverage, accuracy, and granularity of economic analysis and inform policy decisions in fragile contexts.

*Source: IMF country note prepared by Ali Abbas (SPR) and Dallal Bendjellal, Somalia — EAC accession and satellite data for economic monitoring (excerpts).*

### 3.      This paper provides examples of how non-traditional data can be leveraged to better

### 3.      This paper provides examples of how non-traditional data can be leveraged to better understand economic developments and inform macroeconomic policies

### B. Satellite Imagery Data for Monitoring Economic Activity — Monitoring Vegetation as a Proxy of Agriculture Production
- Key advantages:
  - High frequency, short time lag, and extensive geographical coverage.
  - Short time-lag of the satellite data: "5 days" (Sentinel-2 high revisit frequency at the Equator in cloud-free conditions).
  - Images available from "2016-present" and accessible via the Google Earth Engine in near real-time.
- Vegetation index methodology:
  - Land cover data, averaged over multiple years, is used to identify cultivated areas.
  - Normalized Difference Vegetation Index (NDVI) formula: NDVI = (NIR – Red)/ (NIR + Red).
  - NDVI values range from "-1 to 1", with values closer to "1" indicating healthy vegetation, "0" representing bare soil or water, and values near "-1" signifying non-vegetative surfaces.
  - Vegetation indexes combined with landcover of crops provide insights into vegetation health, agricultural productivity, land degradation, and ecosystem health.
- Empirical findings for Somalia:
  - Vegetation indexes clearly captured the impact of the drought in "2021-2022" and the recovery when rains resumed in "2023".
  - Interpreted as a proxy for agriculture production, the indicator suggested that GDP and exports would have weakened during "2021-2022" and started to recover in "2023", consistent with later-published official statistics.
- Policy relevance:
  - Early detection of water stress, drought or flooding conditions, their severity, and spatial extent over key agricultural regions can inform rapid policy responses.
  - Monitoring vegetation indexes across subregions supports differentiated policy responses (e.g., expanding social safety nets or increasing transfer amounts to prevent deterioration in food insecurity).

### B. Satellite Imagery Data for Monitoring Economic Activity — Monitoring Nightlights and Landcover as a Proxy of Urbanization and Development
- Data and resolution:
  - Nightlights data source: Visible and Infrared Imaging Suite (VIIRS) Day Night Band (DNB) on board of JPSS satellites.
  - VIIRS data accessible from the Google Earth Engine from "2012-onwards", at a "100-meter resolution".
- Applications:
  - Nowcasting of quarterly GDP in Sub-Saharan African countries, impact assessment of natural disasters, assessment of lockdown measures during the COVID-19 pandemic, and measuring non-registered economic activity.
- Somalia-specific findings:
  - Mogadishu ranks second in total area covered by high night pollution and has experienced rapid urbanization since "2016".
  - High nightlight pollution area is defined as the area in km2 where the average luminosity intensity is greater than the mid-point of "3.5".
  - Cities like Bossaso, Garoowe, and Kismayo show notable increases in nightlight emissions in recent years, signaling ongoing urbanization.
  - According to the UN, Somalia: "45 percent" of population lived in urban areas as of "2018" with an annual growth rate of "4.23 percent".
- Policy relevance:
  - Combining nightlights with high-frequency landcover data highlights peri-urban development and can inform energy and infrastructure planning.

### C. New Insights in Trade and Passenger Statistics with Sensor Data — Tracking Ships Geolocations to Monitor Trade Disruptions and as a Proxy of Trade
- Data sources and applications:
  - IMF PortWatch and AIS satellite data used to develop timely indicators of maritime trade and enhance trade nowcasting.
  - The IMF PortWatch platform derives port activity and trade volume estimates for "1648 ports" and "24 major maritime passages".
  - For Somalia, PortWatch covers 4 major ports: Mogadishu, Berbera, Bossaso and Kismayo; an ad-hoc AIS dataset was derived for Garacad.
  - The Automatic Identification System (AIS) is mandatory for all ships above "300 gross tons".
- Somalia-specific findings:
  - Official trade estimates historically inferred from Mogadishu data only; starting in "2024" official estimates were upgraded using relative shares from PortWatch data.
  - Customs data (SOMCAS) for Mogadishu: "95 percent" of merchandise imports take place by sea.
  - High-frequency PortWatch/AIS results for early "2024":
    - Trade into Mogadishu through the Red Sea was steady despite regional security risks, but navigation time increased.
    - Since mid-December "2023" attacks in the Red Sea caused a sharp drop in traffic through the Bab al-Mandab Strait and Suez Canal, affecting regional flows.
    - Bilateral flows to Mogadishu show significant increases in delivery time: Türkiye "+14 days", Egypt "+5 days", Oman and Saudi Arabia "+3 days".
    - Customs collections in Mogadishu showed a temporary impact from delays and have since recovered.
- Vessel- and commodity-level insights:
  - AIS-derived estimates of livestock carriers indicate a surge in livestock exports (in metric tons) at the beginning of "2023" that has been sustained.
  - Livestock exports grew at the highest rate ever according to the latest available GDP by the SNBS.
  - Shipments depart mostly through the port of Bossaso and are directed mainly to Saudi Arabia.
  - The March "2023" lifting of the partial livestock ban by Saudi Arabia is linked to the jump in exports.
  - Despite Red Sea security risks, AIS-derived export volume remained robust in "2024H1".
- Port activity statistics:
  - Average port calls: Mogadishu "240" port calls, Berbera "335", Bossaso "84".
  - In terms of volume, Mogadishu port receives "8 percent" more than Berbera.
  - Vessel activity has been picking up in Garacad Seaport since late "2021".
- Policy relevance:
  - High-frequency AIS/PortWatch data can help authorities assess sensitivity to regional disruptions, anticipate fluctuations in customs revenues, monitor balance of payments developments, and inform customs modernization and EAC integration efforts.

### C. New Insights in Trade and Passenger Statistics with Sensor Data — Tracking Flights Geolocations as a Proxy of Passenger Movements
- Methodology:
  - Passenger capacity estimates are derived from aircraft sensors by linking aircraft models to design characteristics that include information on seating capacity.
- Somalia-specific findings:
  - International routes tripled from "7 routes in 2019" to "23 in 2024".
  - Aden Adde (Mogadishu) accounts for "61 percent" of overall passenger capacity from international flights; Hargeisa Egal airport accounts for "33 percent".
  - Domestic passenger capacity for "2024" up to August is already "12 percent" higher than the total for "2023".
- Policy relevance:
  - Flight information is useful for surveillance of flight disruptions, monitoring tourism recovery, anticipating external balance implications, and increasing revenues from overflight fees.

### D. Looking Forward — Integration with Official Statistics and Capacity Building
- Complementarity and recent improvements:
  - Satellite imagery and sensor-derived indicators can complement official data by filling data gaps, improving geographic coverage, and providing timely, high-frequency indicators.
  - Somalia has improved its statistical system, data reporting, and data transparency, with upcoming developments including GDP by production, the first census in "40 years", and a new agricultural census.
- Institutional recommendations and ongoing IMF engagement:
  - As statistical capacity strengthens, nowcasting of economic and trade activity can be explored further with IMF support.
  - Ongoing IMF research and capacity development use remote sensing and other Big Data sources to produce nowcasts of quarterly real GDP growth for some countries in Sub-Saharan Africa.
  - The Somali authorities are encouraged to continue engagement with the IMF and other international organizations to leverage non-traditional data sources and innovative techniques.
  - The IMF Big Data Center plans to expand interactions with member countries to maximize the value of Big Data for macroeconomic, macro-fiscal, and financial market surveillance and statistical capacity building.

*Source: IMF staff note prepared by Alessandra Sozzi (STA), as published in the referenced IMF country report section.*

### 4. Eligibility. Eligibility for a benefit is based on age and employment records. The Act sets

### 4. Eligibility

### Eligibility and retirement age
- Eligibility for a benefit is based on age and employment records.
- The Act sets the normal retirement age at 65 for both men and women.
- Life expectancy at 65 is 12.5 years for men and 13.5 years for women, according to UN population projections.
- The retirement age at 65 years is mandatory: all public sector workers must retire at this age, without exception.
- Early retirement of no more than 60 months (5 years) is possible, resulting in an early retirement penalty of 0.5 percent per month.
- Deferred (late) retirement is not permitted.

### Contribution rate
- The contribution rate is 10 percent, equally shared by employees and the government, as employer.
- Scenario: Increasing the total contribution rate to 15 percent from 2030 onwards would make the scheme’s cashflows positive until around 2075, and reserves ensuring liquidity for several years afterwards.
- Projection: From the early 2050s, the scheme’s contribution revenues will only cover approximately 2/3 of the benefit expenditures.

### Benefits structure and indexing
- Benefits are paid as a monthly pension for people with at least 10 years of work history in pensionable (permanent) positions, or as a gratuity for workers reaching retirement with shorter service periods.
- Old age pensions are calculated on the basis of career average basic wages, using a 1.5 percent accrual rate, resulting in a minimum replacement rate of 15 percent.
- Pension benefits are subject to a 75 percent maximum replacement rate.
- There is no minimum benefit.
- Past wages counting towards the pension formula are valorized in line with wages while benefits in payment are to be indexed to prices.

### Benefits for workers with less than 10 years of service
- Workers reaching retirement with less than 10 years of service time are paid a lumpsum gratuity equal to one month of their average (valorized) wage for every year of service.
- If retiring between ages 50 and 59 with less than 10 years of service, the lumpsum is reduced by 10 percent.
- If retiring between ages 40 and 49 with less than 10 years of service, the lumpsum is reduced by 20 percent.
- If the person re-joins the civil service and total service time exceeds 10 years, they may become eligible for an annuity provided they repay the lumpsum collected earlier.

### Service time and wage histories
- Service time and wage histories for the years since 2007 have been recorded and serve as the basis for establishing eligibility and calculating pensions with regard to the past 18 years.
- Given lack of historic records before 2007, the government decided—on advice from the World Bank—to use age (birth year) to estimate service years credited for the period before 2007.
- The age-dependent recognition of pre-2007 service times was designed to grant a service history of 30 years to everyone who has an uninterrupted work record since 2007.
- The 30-year service time translates into a 45 percent replacement rate.
- Recognition of past service time is irrespective of the fact that no contributions were or will have been made prior to the application of the new Act, immediately creating both a pension liability and benefit payment obligation towards civil servants 65 years or older.

### Disability and survivor benefits
- Disability benefits: Eligibility is conditioned on total incapacity to work, and benefits are calculated in the same way as old age pensions.
- Scheme rules differentiate between causes of disability; in work-related disability it is assumed the individual would have continued working in the same position as at onset.
- Survivor pensions: available to spouses (until re-marriage), sons up to the age of 18, daughters until marriage without age limit, and to parents who can prove reliance on the deceased member’s earnings.
- The law recognizes both legal and “customary” marriages, i.e., cohabiting with more than one female spouse.
- Survivor benefit amounts: 50 percent of the originating old age or disability pension in case of a single survivor and 70 percent in case of more survivors, divided among all claimants.
- The number of survivors cannot increase the total periodic benefit above 70 percent of the originating pension.

### Institutional framework
- The Pension and Gratuity Fund will be governed by the Pension and Gratuity Oversight Committee (PGOC), a newly created, independent government agency, reporting directly to the President.
- The PGOC will operate with 5 voting members, including the Minister of Finance, Minister of Labor, a representative of civil service trade unions, and a representative of the National Civil Service Commission.
- Day-to-day operation rests with the Pension and Gratuity Directorate (PGD): contribution collections, investment of reserves, record keeping, assessing eligibility, and paying pensions.
- The PGOC is tasked with preparing triannual actuarial assessments as well as long-term projections every five years.
- The Act is unclear with respect to the differences in scope and consequences of the two types of reports.

### Fiscal and welfare implications; scheme financing dynamics
- The new pension scheme is a defined benefit plan financed on a pay-as-you-go basis, with current revenues financing current expenditures.
- The scheme will start paying benefits straight away and will recognize past service histories for which no contributions were collected, causing it to mature faster and create unfunded liabilities.
- The contribution rate of 10 percent over the basic salary falls short of the equilibrium level required for long-term self-sufficiency.
- For the initial phase, current revenues will slightly exceed expenditures and a reserve fund will accumulate; these reserves will then rapidly disappear, starting in the early 2030s.
- The scheme’s cash flows will turn negative around 2035, with reserves projected to be fully depleted within 25 years of the scheme’s launch; from that point onward the scheme will require budget subsidies to maintain liquidity.
- Combined employer and employee contributions will not ensure the scheme’s long-term financial self-sufficiency.

### Constraints on contribution rate increases
- Main constraints to setting contributions closer to equilibrium at launch:
  - (1) Severe constraints on fiscal resources do not allow for higher levies; higher employer contributions translate into a higher wage bill and may imply further outlays if employee contributions are compensated.
  - (2) Any reserves accumulated need to be invested in reasonably safe, liquid, and transparently priced instruments earning positive real returns; such instruments do not exist in Somalia, risking reserves financing public debt or illiquid assets.
- Given these constraints, contribution rates will need to be gradually increased over time.

### Implementation issues, uncertainties, and risks
- Main fiscal uncertainties and risks:
  - (1) The government’s ability to keep temporary workers out of the new scheme permanently. Policy option: design a medium-term policy to compensate temporary workers for absence of pension entitlements and reduce the share of temporary workers over time.
  - (2) The impact of the pay and grade reforms and human resource policies under consideration; clarity on the proposed wage bill and reforms is needed to revise financial projections.
  - (3) The number and age structure of eligible survivors; currently no public information is collected on potential survivors, hindering reliable financial projections. Creation of a dependent registry is important.
  - (4) The placement and returns of the reserves expected to accumulate (and then decumulate) in the next 25-30 years; limited near-term investment opportunities given the state of capital markets and financial intermediation.
- Recommended preparatory actions:
  - Precede application of the Act with a fiscal impact assessment informed by the planned civil service pay and grade reform and a realistic implementation plan.
  - Update financial projections once details of the planned civil service pay reform are known.
  - Implementation plan should cover establishment of the Pension and Gratuity Directorate, the Oversight Committee, and the Pension and Gratuity Fund.
  - Implementation plan needs detailed and realistic estimates of operating costs and initial investments for the Directorate, the Committee, and the Fund, and an assessment of technical and financial assistance needed during the first years of operation.

*Source: 4. Eligibility (extracted content).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1somea2024003-print-pdf.pdf_