IMF Staff Completes 2017 Article IV Consultation Discussions and First Review under the Staff-Monitored Program with Somalia
IMF News, December 12, 2017
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- Published: December 12, 2017
Mission overview and context
- An IMF team led by Mohamad Elhage visited Nairobi, Kenya during December 5-11 to conduct the 2017 Article IV Consultation and the first review of the Staff Monitored Program (SMP).
- On June 21, 2017, IMF management approved a 12-month SMP covering the period May 2017—April 2018, following Somalia’s successful completion of its first SMP since the end of the civil war.
- The SMP is designed to help economic reconstruction efforts and to start establishing a track record of policy and reform implementation.
- The IMF mission met with: Finance Minister Mr. Abdirahman Beileh; Minister of Fisheries and Marine Resources, Mr. Abdirahman M. Abdi Hashi; Central Bank Governor, Mr. Bashir Issa Ali; the Accountant General, Ms. Fatuma Osman Farah; Mr. Abdirahman M. Abdullahi, Advisor to the Prime Minister; Ms. Hodan Isse, Board of Governors of the Central Bank; other officials; and representatives from development partners.
Economic developments and projections
- 2017: Growth is projected to remain subdued at 1.8 percent.
- 2017: Inflation is projected to pick up to 3.7 percent.
- 2016: Growth was 2.4 percent.
- 2016: Inflation was 1.3 percent.
- Trade deficit is projected to remain high—reflecting increased food imports and lower exports—and will be largely financed by grants and remittances.
- The drought and sporadic terrorist attacks in 2017 negatively affected economic activity and temporarily impacted the Federal Government of Somalia’s tax collection efforts.
- Sustained international support helped avoid a severe humanitarian crisis in 2017.
- 2018–19: Growth is expected to recover to 2.5–3.0 percent.
- 2018–19: Inflation is expected to decline to 2.0-2.5.
Program implementation and institutional progress
- The authorities’ performance under the SMP through September 2017 was broadly satisfactory.
- Authorities have:
- Updated their memorandum of economic and financial policies for the period 2018—19.
- Nearly completed the currency reform roadmap.
- Drafted a roadmap for the development of the financial sector.
- The mission emphasized the need to continue rebuilding key economic and financial institutions and improving economic and financial data.
Key policy recommendations and reform priorities
- Strengthen economic resilience, accelerate the recovery and foster social inclusion:
- Continue advancing the broad-based growth reform agenda outlined under the mutual accountability framework in collaboration with development partners.
- Update the National Development Plan with increased focus on governance, anti-corruption, and social safety net programs.
- Continue to improve capacity and governance:
- Redouble efforts to develop capacity of public institutions and rebuild economic and financial data.
- IMF stands ready to intensify capacity development activities in Somalia using the multi-donor trust fund to help rebuild institutions and infrastructure.
- Authorities are encouraged to continue tangible initiatives to combat corruption and improve governance.
- Enhance fiscal discipline and the fiscal framework:
- Adhere to fiscal discipline and improve the fiscal framework.
- Refrain from any expenditures that are not fully covered by realistic revenue projections or grants.
- Remain current on the government’s obligations.
- Enhance public financial management and cash management to improve budget execution and avoid accumulation of domestic arrears.
- Increase domestic revenues by expanding the revenue base, initially focusing on the sales tax and customs, to provide additional resources for priority spending.
- Carefully prepare the currency reform and strengthen financial institutions:
- With preconditions for currency reform nearly completed, carefully prepare for the launch of the new Somali Shilling.
- Maintain political support for combating counterfeiting; develop a well-designed communications strategy for the launch of the new currency.
- Complete and implement the draft financial sector roadmap to revive the nascent financial sector and support economic growth and poverty reduction.
Press Release No. 17/483 — IMF Communications Department, December 12, 2017.