Statement by the IMF Mission on Somalia

IMF News, November 21, 2016

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An IMF team led by Mohamad Elhage visited Nairobi from November 14–21 to hold discussions with Somali authorities on the 2016 Article IV Consultation and the first review of the Staff-Monitored Program (SMP).
Discussions covered: the near-and medium-term outlook, economic risks; reforms at the Central Bank of Somalia (CBS); and policies to sustain growth and revive the financial sector.
The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

2016 real GDP growth is projected at 3.7 percent, driven by the telecommunication, construction and service sectors.
2016 consumer price inflation is projected to remain low at about 1.0-1.5 percent, reflecting mainly weak commodity prices.
2017 growth is projected to decelerate to about 2.5, while inflation is expected to remain subdued at 1-2 percent.
Growth is expected to recover to about 3.5–4.5 percent in 2018–19.
The slower growth rate in 2017 reflects mainly the impact of the weak rainy season on the agriculture sector.
Construction, telecommunications, and service sectors are projected to continue to register strong growth.
The external current account deficit is projected to remain large; remittances and grants are expected to cover the deficit.
The Somali Shilling/U.S. dollar exchange rate has remained stable within the range of about 22,200 and 23,000 since February 2015.

The authorities have met all the structural benchmarks and six out of seven quantitative performance targets for the first review of the SMP.
Domestic government arrears were accumulated due to a shortfall in revenues and delayed donors’ grants disbursement through end of September.
The authorities were able to settle these new arrears following a recent disbursement of donors’ grants.
Authorities have taken corrective measures to avoid the occurrence of future arrears, including updating their memorandum of economic and financial policies and establishing a comprehensive roadmap for currency reform.

National development plan:
- Continue progress on the preparation of a coherent national development plan with a roadmap for institution building and strong program for social safety nets.
- Improve the business environment to encourage private sector activity.
Capacity development:
- Develop domestic capacity and continue to rebuild economic and financial data.
- The IMF will continue to intensify capacity development activities in Somalia using the multi-donor trust fund to help rebuild Somalia’s institutions and economic and financial infrastructure.
Fiscal discipline:
- Continue to strengthen fiscal discipline while ensuring the fiscal framework underscores the need for a realistic tax revenue projection and confirmed external grants to avoid new arrears.
- Place high priority on enhancing budget execution, adhere to the new arrears management strategy, and broaden the revenue base.
Currency reform and governance:
- Adhere to the agenda for currency reform, reinforce central bank governance structure, and improve safeguard procedures.
- Effective implementation of the anti-money laundering (AML) Law and guidelines is needed to sustain remittance inflows, which are vital for supporting economic growth.

During the visit, the team met with Finance Minister Mohamed Adan Ibrahim; the Minister of Planning and International Cooperation Abdirahman Yusuf Hussein Aynte; Central Bank Governor Bashir Issa Ali; Director General at the Office of the President Ali Omar; other officials; and representatives from development partners.
The Staff Report for the 2016 Article IV Consultation and the first review under the SMP is anticipated to be discussed by the IMF’s Executive Board in late January 2017.

Press Release No. 16/519 — Statement by the IMF Mission on Somalia — November 21, 2016.