## SOMALIA — Consumer Price Index Mission (May 3–14, 2023)

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---

### Summary of Mission Outcomes and Priority Recommendations
- Mission purpose and main tasks:
  - Assist with updating CPI weights based on the Somalia Integrated Household Budget Survey (SIHBS).
  - Assist with updating consumer basket.
  - Assist with linking the old and new CPI series and introducing new index reference period.
  - Provide practical training and guidance to SNBS staff in design and operation of the new compilation system.
- Mission logistics:
  - Mission held in Nairobi, Kenya due to security reasons.
  - Mission dates: May 3–14, 2023.
- Timetable and key target dates (Table 1 / Table 2):
  - May 2023: Complete the new basket and weights. (Responsible: SNBS)
  - June 2023: Start collecting prices in states for all the new items. (Responsible: SNBS and state offices)
  - September 2023: Establish the price reference period based on June–August. (Responsible: SNBS)
  - Table 2 key milestones and target completion dates:
    - Complete the update of the new weights and basket of items based on the SIHBS. — May 2023
    - Start the price collecting of the new items in states. — June 2023
    - Establish routines with the state of when and how monthly prices should be delivered to the SNBS. — July 2023
    - Expand the index calculation system to cover the new basket of items and states. — August 2023
    - Calculate the new price reference period prices. — September 2023
    - Link the COICOP 1999 series to the new COICOP 2018. — September 2023
    - Re-reference the current CPI. — September 2023
    - Compile a test of the new CPI. — September 2023
    - Disseminate the new national CPI. — January 2024
- Publication planning and adjustments:
  - SNBS initially aiming to publish a national CPI in August 2023 with July 2023 as the overlap month between the new and the old CPI.
  - Recommendation to postpone introduction until September prices are available to give time for price collectors and system adjustments.
  - Following TA, SNBS revised the updated CPI dissemination plan to early 2024.

### A. The Integrated Household Budget Survey – Deriving New Weights
- SIHBS overview:
  - Benchmark SIHBS conducted in July, August, and September 2022.
  - Social, health and demographic indicators disseminated in February 2023.
  - SIHBS consumption expenditures were processed and analyzed during the mission.
  - SIHBS planned every five years; implemented with a one-site contractor (funded by the World Bank).
- Data processing and validation issues:
  - SIHBS consumption data needed more processing and validation than expected.
  - Lack of expenditures for several COICOP divisions (noted divisions: 08, 09 [some items], 10, 11) requires further investigation of SIHBS.
  - Missing expenditures within COICOP 09 (recreation, sport and culture) — example missing: textbooks (to be clarified if classified within education module).
  - Need for clear instructions to validate under- or overreporting and for ongoing contact between interviewers and processing staff; follow-up with households should be done shortly after interview to clarify outliers.
  - Creating a correspondence table between COICOP codes and SIHBS item codes required large manual effort during the mission.
  - Recommendation to spread collection of expenditures over one year using rotating samples of households to limit effects of shocks (e.g., oil price shock, drought).
- Weight derivation and regional weights:
  - Aggregated expenditures on national level were available after validation during the mission.
  - Annual expenditures obtained by standardizing seven- or 30-day expenditures.
  - A system for deriving weights was developed in Excel using COICOP correspondence.
  - No regional expenditure shares were available during the mission; regional weights ideally should be available at division or group COICOP level for EA aggregation.
  - If not possible to split national expenditures by state, one solution: split into Mogadishu and all the other states as one part.
- Preliminary SIHBS expenditure results (Table 3 — preserve values exactly):
  - COICOP 2018 Division — Expenditures, US dollar — Share of total consumption in % — Share 2016 (SHFS all states) in %
  - 01 Food and Non-Alcoholic Beverages — 18,749,601 — 51.49 — 61.3
  - 02 Alcoholic Beverages, Tobacco & Narcotics — 751,307 — 2.06 — 2.2
  - 03 Clothing and Footwear — 3,168,422 — 8.70 — 7.52
  - 04 Housing, Water, Electricity, Gas, and other Fuels — 3,858,754 — 10.60 — 12.05
  - 05 Furnishings, Household Equipment and Household Maintenance — 1,843,200 — 5.06 — 3.32
  - 06 Health — 563,800 — 1.55 — 0.66
  - 07 Transport — 3,119,292 — 8.57 — 1.22
  - 08 Information and communication — 1,464,078 — 4.02 — 1.23
  - 09 Recreation, sport, and culture — 198,401 — 0.54 — 0.35
  - 10 Education services — 536,415 — 1.47 — 1.08
  - 11 Restaurants and accommodation services — 342,531 — 0.94 — 6.85
  - 12 Insurance and financial services — 108,184 — 0.30 — 2.22
  - 13* Personal care, social protection and miscellaneous goods and services — 1,712,474 — 4.70 — (no 2016 share shown)
  - Total — 36,416,459 — 100
  - Note: In COICOP 2018, Division 12 is split in division 12 and 13. In 2016, figures were aggregated using COICOP 1999 with 12 Divisions.
- Recommended actions:
  - Finalize the validating of the SIHBS and complete the new CPI weights.
  - Split the SIHBS consumption expenditures to state level, depending on the robustness of the collected expenditures.
  - Decide on state weights to be used to aggregate together EA indices to the national item level.
  - Build capacity in necessary methodology for the next SIHBS.

### B. Expanding Geographical Coverage
- Current coverage and objectives:
  - Since 2021, price collection expanded to urban areas of all states except Middle Juba.
  - SNBS aims to get all prices by end of reference month from Mogadishu and federal states: Galmudug, Hirshabelle, Jubaland, Puntland, and South West.
  - SNBS will calculate national CPI centrally (rather than weighting state indices calculated by state offices), though states trained to conduct price collection and compile state CPIs.
- Enumerators (Table 4 — preserve numbers):
  - Mogadishu — 10
  - Puntland State — 6
  - Galmudug State — 5
  - Hirshabelle State — 5
  - South West State — 5
  - Jubaland State — 4
  - Total enumerators overall: 35 enumerators.
- Price collection details and recommendations:
  - Decide whether states should report individual prices of varieties or just average price for each item; reporting variety prices provides more control for verification.
  - Avoid manual entry of all prices into main entry system; consider sharing the price entry system with all states or connecting mobile data collection apps to the price entry system to simplify data entry.
  - National EA indices should be calculated by weighting each state separately. If state weights are insignificant, consider two EAs: Mogadishu and the rest of Somalia.
  - New items in consumer basket require price observations for at least three months to be included in the price reference period; prices for new items planned to start in June at the earliest — recommendation to postpone introduction to include September prices.
  - Price collection for new services (e.g., financial services) may require extra training of price collectors.
- Index calculation system notes and recommendations:
  - SNBS developed an index calculation system that calculates geometric mean prices and aggregates item indices; system should be adjusted for additional states, new weights, and updated basket.
  - Identified issues:
    - Rounding geometric mean price to the nearest 1000 when pasting into the calculation system — should change when new CPI is introduced based on prices in US dollar.
    - Calculated geometric mean based on observed prices is sometimes replaced by another “mean price” in production system without tracing in the price entry system — the geometric mean in price entry system should correspond with the index calculation system and any rejection should be traceable with a comment.
    - Tendency to round or replace means should be corrected.
  - Recommendation to develop system functionality to identify outliers before macro-level analysis; current production system has macro-level visualizations but EA/item-level checks needed.
  - Suggested test for calculation system: use fictive prices equal to reference prices by copying reference prices to the calculating month — with identical prices index should equal 100; deviation indicates system issues.
  - Statistics Sweden (SCB) will assist in modifying the current index calculation system before establishing the national CPI.
- Currency and reference period considerations:
  - Prices are planned to be collected in United States Dollars for the updated CPI.
  - With updated weights less frequent than yearly, recommended that prices from at least three months are included in the new price reference period.
  - SNBS planned to use July 2023 as overlap month between new and old CPI initially; recommendation to establish price reference period based on June–August.

### Section 2 — Recommended Actions (timing, data collection, and indexing)
- Prioritization and timing:
  - Postpone the calculation of the new national CPI until September prices are available and use June–August as price reference period (as the earliest).
  - Start price collection of the items in the new CPI basket as soon as possible in all states.
  - Instruct and train price collectors when looking for the new items, especially new services.
  - Clarify with the states how and when to receive prices.
  - Use at least three months of price observations in the price reference period.
  - Calculate a fictive version of the new CPI as a test of the adjusted production system.
  - Re-reference the current national CPI to the new CPI with the new linking period that equals 100.
- New basket and new classification (COICOP changes, replacements, and linking):
  - The SIHBS has proposed a new basket of items with the correspondence between COICOP 2018 and COICOP 1999.
  - The suggested new items are in line with the COICOP 2018, especially by introducing more services within health, information and communication and financial services, but also quite a lot of new items.
  - One important task when updating the weights and the basket of items is removing obsolete items that are no longer representative.
  - When a replacement is necessary, a new variety is chosen, and an implicit quantity/quality adjustment is conducted if the new and the old varieties are not comparable.
    - The current practice is that a quality adjustment is done by asking what the price for the new variety was in the previous month.
    - Along with expanding price collection due to expanded basket of items and geographical coverage, one future step could be to build into the index calculation system an automatic imputation of missing prices based on the price movements of all price observations from the previous month to the current one for the specific new variety.
  - COICOP 2018 is expanded by one new division 13.
  - In addition, some components appear in different divisions, and classes, and among others there are several changes within division 08 and 09 (information and communication; recreation, sport, and culture).
  - For most of the index series at detailed level there is a one-to-one link between the new and the old codes, thus the correspondence table established in the proposed new basket will be used.
  - Where there is a split up and a 5-digit subclass is divided into two new ones, the back series for the old subclass can be used as the back series for both the new subclasses.
  - Totally new indices in the CPI do not have any back series and start by 100 in the linking period between the current and the new CPI.
  - Linking of the series to each other should be done before re-referencing.
- Recommended Action:
  - Consider removing items from the basket that are outdated or unnecessary to be priced.

### Officials met during the mission
- Hashim Sheikh Abdinoor — SNBS — Statistician
- Abdulkadir Dahir Ahmed — SNBS — Head of CPI Section
- Abdirashid Khalif Mohamed — SNBS — Economist
- Ayan Abdullahi Abdi — SNBS — Economist
- Mohamed Noor Ahmed — SNBS — CPI Data Analyst
- Mohamed Abdinur Mohamed — SNBS — Statistician
- Naima Mohamed Ibrahim — SNBS — Economist

*IMF | Technical Assistance Report – Somalia Consumer Price Index Mission*

### Section 1

### SOMALIA — Consumer Price Index Mission (May 3–14, 2023)

### Summary of Mission Outcomes and Priority Recommendations
- Mission purpose and main tasks:
  - Assist with updating CPI weights based on the Somalia Integrated Household Budget Survey (SIHBS).
  - Assist with updating consumer basket.
  - Assist with linking the old and new CPI series and introducing new index reference period.
  - Provide practical training and guidance to SNBS staff in design and operation of the new compilation system.
- Mission logistics:
  - Mission held in Nairobi, Kenya due to security reasons.
  - Mission dates: May 3–14, 2023.
- Timetable and key target dates (Table 1 / Table 2):
  - May 2023: Complete the new basket and weights. (Responsible: SNBS)
  - June 2023: Start collecting prices in states for all the new items. (Responsible: SNBS and state offices)
  - September 2023: Establish the price reference period based on June–August. (Responsible: SNBS)
  - Table 2 key milestones and target completion dates:
    - Complete the update of the new weights and basket of items based on the SIHBS. — May 2023
    - Start the price collecting of the new items in states. — June 2023
    - Establish routines with the state of when and how monthly prices should be delivered to the SNBS. — July 2023
    - Expand the index calculation system to cover the new basket of items and states. — August 2023
    - Calculate the new price reference period prices. — September 2023
    - Link the COICOP 1999 series to the new COICOP 2018. — September 2023
    - Re-reference the current CPI. — September 2023
    - Compile a test of the new CPI. — September 2023
    - Disseminate the new national CPI. — January 2024
- Publication planning and adjustments:
  - SNBS initially aiming to publish a national CPI in August 2023 with July 2023 as the overlap month between the new and the old CPI.
  - Recommendation to postpone introduction until September prices are available to give time for price collectors and system adjustments.
  - Following TA, SNBS revised the updated CPI dissemination plan to early 2024.

### A. The Integrated Household Budget Survey – Deriving New Weights
- SIHBS overview:
  - Benchmark SIHBS conducted in July, August, and September 2022.
  - Social, health and demographic indicators disseminated in February 2023.
  - SIHBS consumption expenditures were processed and analyzed during the mission.
  - SIHBS planned every five years; implemented with a one-site contractor (funded by the World Bank).
- Data processing and validation issues:
  - SIHBS consumption data needed more processing and validation than expected.
  - Lack of expenditures for several COICOP divisions (noted divisions: 08, 09 [some items], 10, 11) requires further investigation of SIHBS.
  - Missing expenditures within COICOP 09 (recreation, sport and culture) — example missing: textbooks (to be clarified if classified within education module).
  - Need for clear instructions to validate under- or overreporting and for ongoing contact between interviewers and processing staff; follow-up with households should be done shortly after interview to clarify outliers.
  - Creating a correspondence table between COICOP codes and SIHBS item codes required large manual effort during the mission.
  - Recommendation to spread collection of expenditures over one year using rotating samples of households to limit effects of shocks (e.g., oil price shock, drought).
- Weight derivation and regional weights:
  - Aggregated expenditures on national level were available after validation during the mission.
  - Annual expenditures obtained by standardizing seven- or 30-day expenditures.
  - A system for deriving weights was developed in Excel using COICOP correspondence.
  - No regional expenditure shares were available during the mission; regional weights ideally should be available at division or group COICOP level for EA aggregation.
  - If not possible to split national expenditures by state, one solution: split into Mogadishu and all the other states as one part.
- Preliminary SIHBS expenditure results (Table 3 — preserve values exactly):
  - COICOP 2018 Division — Expenditures, US dollar — Share of total consumption in % — Share 2016 (SHFS all states) in %
  - 01 Food and Non-Alcoholic Beverages — 18,749,601 — 51.49 — 61.3
  - 02 Alcoholic Beverages, Tobacco & Narcotics — 751,307 — 2.06 — 2.2
  - 03 Clothing and Footwear — 3,168,422 — 8.70 — 7.52
  - 04 Housing, Water, Electricity, Gas, and other Fuels — 3,858,754 — 10.60 — 12.05
  - 05 Furnishings, Household Equipment and Household Maintenance — 1,843,200 — 5.06 — 3.32
  - 06 Health — 563,800 — 1.55 — 0.66
  - 07 Transport — 3,119,292 — 8.57 — 1.22
  - 08 Information and communication — 1,464,078 — 4.02 — 1.23
  - 09 Recreation, sport, and culture — 198,401 — 0.54 — 0.35
  - 10 Education services — 536,415 — 1.47 — 1.08
  - 11 Restaurants and accommodation services — 342,531 — 0.94 — 6.85
  - 12 Insurance and financial services — 108,184 — 0.30 — 2.22
  - 13* Personal care, social protection and miscellaneous goods and services — 1,712,474 — 4.70 — (no 2016 share shown)
  - Total — 36,416,459 — 100
  - Note: In COICOP 2018, Division 12 is split in division 12 and 13. In 2016, figures were aggregated using COICOP 1999 with 12 Divisions.
- Recommended actions (derived from section):
  - Finalize the validating of the SIHBS and complete the new CPI weights.
  - Split the SIHBS consumption expenditures to state level, depending on the robustness of the collected expenditures.
  - Decide on state weights to be used to aggregate together EA indices to the national item level.
  - Build capacity in necessary methodology for the next SIHBS.

### B. Expanding Geographical Coverage
- Current coverage and objectives:
  - Since 2021, price collection expanded to urban areas of all states except Middle Juba.
  - SNBS aims to get all prices by end of reference month from Mogadishu and federal states: Galmudug, Hirshabelle, Jubaland, Puntland, and South West.
  - SNBS will calculate national CPI centrally (rather than weighting state indices calculated by state offices), though states trained to conduct price collection and compile state CPIs.
- Enumerators (Table 4 — preserve numbers):
  - Mogadishu — 10
  - Puntland State — 6
  - Galmudug State — 5
  - Hirshabelle State — 5
  - South West State — 5
  - Jubaland State — 4
  - Total enumerators overall: 35 enumerators.
- Price collection details and recommendations:
  - Decide whether states should report individual prices of varieties or just average price for each item; reporting variety prices provides more control for verification.
  - Avoid manual entry of all prices into main entry system; consider sharing the price entry system with all states or connecting mobile data collection apps to the price entry system to simplify data entry.
  - National EA indices should be calculated by weighting each state separately. If state weights are insignificant, consider two EAs: Mogadishu and the rest of Somalia.
  - New items in consumer basket require price observations for at least three months to be included in the price reference period; prices for new items planned to start in June at the earliest — recommendation to postpone introduction to include September prices.
  - Price collection for new services (e.g., financial services) may require extra training of price collectors.
- Index calculation system notes and recommendations:
  - SNBS developed an index calculation system that calculates geometric mean prices and aggregates item indices; system should be adjusted for additional states, new weights, and updated basket.
  - Identified issues:
    - Rounding geometric mean price to the nearest 1000 when pasting into the calculation system — should change when new CPI is introduced based on prices in US dollar.
    - Calculated geometric mean based on observed prices is sometimes replaced by another “mean price” in production system without tracing in the price entry system — the geometric mean in price entry system should correspond with the index calculation system and any rejection should be traceable with a comment.
    - Tendency to round or replace means should be corrected.
  - Recommendation to develop system functionality to identify outliers before macro-level analysis; current production system has macro-level visualizations but EA/item-level checks needed.
  - Suggested test for calculation system: use fictive prices equal to reference prices by copying reference prices to the calculating month — with identical prices index should equal 100; deviation indicates system issues.
  - Statistics Sweden (SCB) will assist in modifying the current index calculation system before establishing the national CPI.
- Currency and reference period considerations:
  - Prices are planned to be collected in United States Dollars for the updated CPI.
  - With updated weights less frequent than yearly, recommended that prices from at least three months are included in the new price reference period.
  - SNBS planned to use July 2023 as overlap month between new and old CPI initially; recommendation to establish price reference period based on June–August.

*Prepared by Randi Johannessen; Technical Assistance Report, Statistics Department, IMF, SEPTEMBER 2023.*

### Section 2

### tarea2024022 - Section 2

### Recommended Actions (timing, data collection, and indexing)
- Postpone the calculation of the new national CPI until September prices are available and use June–August as price reference period (as the earliest).
- Start price collection of the items in the new CPI basket as soon as possible in all states.
- Instruct and train price collectors when looking for the new items, especially new services.
- Clarify with the states how and when to receive prices.
- Use at least three months of price observations in the price reference period.
- Calculate a fictive version of the new CPI as a test of the adjusted production system.
- Re-reference the current national CPI to the new CPI with the new linking period that equals 100.

### New basket and new classification (COICOP changes, replacements, and linking)
- The SIHBS has proposed a new basket of items with the correspondence between COICOP 2018 and COICOP 1999.
- The suggested new items are in line with the COICOP 2018, especially by introducing more services within health, information and communication and financial services, but also quite a lot of new items.
- One important task when updating the weights and the basket of items is removing obsolete items that are no longer representative.
- When a replacement is necessary, a new variety is chosen, and an implicit quantity/quality adjustment is conducted if the new and the old varieties are not comparable.
  - The current practice is that a quality adjustment is done by asking what the price for the new variety was in the previous month.
  - Along with expanding price collection due to expanded basket of items and geographical coverage, one future step could be to build into the index calculation system an automatic imputation of missing prices based on the price movements of all price observations from the previous month to the current one for the specific new variety.
- COICOP 2018 is expanded by one new division 13.
- In addition, some components appear in different divisions, and classes, and among others there are several changes within division 08 and 09 (information and communication; recreation, sport, and culture).
- For most of the index series at detailed level there is a one-to-one link between the new and the old codes, thus the correspondence table established in the proposed new basket will be used.
- Where there is a split up and a 5-digit subclass is divided into two new ones, the back series for the old subclass can be used as the back series for both the new subclasses.
- Totally new indices in the CPI do not have any back series and start by 100 in the linking period between the current and the new CPI.
- Linking of the series to each other should be done before re-referencing.

Recommended Action:
- Consider removing items from the basket that are outdated or unnecessary to be priced.

### Officials met during the mission
- Hashim Sheikh Abdinoor — SNBS — Statistician
- Abdulkadir Dahir Ahmed — SNBS — Head of CPI Section
- Abdirashid Khalif Mohamed — SNBS — Economist
- Ayan Abdullahi Abdi — SNBS — Economist
- Mohamed Noor Ahmed — SNBS — CPI Data Analyst
- Mohamed Abdinur Mohamed — SNBS — Statistician
- Naima Mohamed Ibrahim — SNBS — Economist

*IMF | Technical Assistance Report – Somalia Consumer Price Index Mission*

---


_Source: https://www.imf.org/-/media/files/publications/tar/2024/english/tarea2024022.pdf_