An International Monetary Fund (IMF) staff team led by Mohamad H. Elhage
visited Nairobi, Kenya, from December 1–6 to meet the Somali authorities
and conduct the first review under the 12-month (May 2018-April 2019)
Staff-Monitored Program (SMP).
At the end of the visit, Mr. Elhage issued the following statement:
“Following productive discussions, the IMF team and the Somali authorities
reached a staff-level agreement on the completion of the first review under
the Staff-Monitored Program (SMP). The agreement is subject to approval by
the IMF Managing Director, who is expected to consider the Staff Report for
the first review under the SMP in early 2019.
“Economic activity in 2018 is recovering from the 2016–17 drought. A
favorable rainy season is supporting the economic recovery, particularly in
the agricultural and livestock sectors; this is leading to a decline in
food prices. Increased activities in the construction, communication,
commerce, and service sectors are expected to be sustained. As a result,
real GDP growth and inflation are projected at 3.1 and 3.5 percent (from
2.3 and 5.5 percent in 2017), respectively. Overall, fiscal performance
through September 2018 has been strong. The fiscal balance at end of
September recorded a surplus of $8 million (up from $2.3 million in June),
mainly due to continued strong domestic revenue collection.
“The Somali authorities are determined to achieve their long-term recovery
and growth objectives. They are stepping up efforts to prepare the ninth
National Development Plan (NDP9). It is built on the 2017–19 NDP (NDP8),
and the authorities intend it to serve as the basis for an interim Poverty
Reduction Strategy Paper (i-PRSP) document that will lay out the Somali
development goals, challenges, and financing requirements. This will
require substantial financing needs and donors’ support as well as Somali
stakeholders’ participation at all levels.
“Despite a difficult environment, performance under the SMP is strong. The
IMF team welcomes the authorities’ commitment to continue improving the
fiscal framework for the remainder of 2018 and for 2019 by expanding gains
from the new tax measures and by keeping expenditure under control. The
team recommended several measures to strengthen public financial management
(PFM) reform, including expenditure control and minimizing the use of cash
advances; improving domestic arears management capacity; maintaining
efforts toward achieving Treasury Single Account; and continuing to make
progress toward fiscal federalism.
“The authorities have made considerable progress in implementing steps to
support the launch of the new national currency. The team supports the
Somali authorities’ effort to continue reaching out to donors to secure
funding for the currency reform project.
“The team stresses the importance of accelerating the implementation of
financial sector reforms, with priority placed on restructuring of the
central bank and regulating the mobile money sector. While progress
continues on improving commercial bank and non-banking supervision, there
is a need to further strengthen the capacity of the Licensing and
Supervision Department. The team welcomes the submission of the Targeted
Financial Sanctions Law to Parliament and stresses that its steadfast
implementation would help safeguard the large remittance inflows to
Somalia. In this regard, the team also encourages the authorities to
support capacity development at the Financial Reporting Center (FRC).
“The team encourages the Somali authorities to sustain their reform
momentum. After a successful completion of the first two 12-month SMPs
(from May 2016 to April 2018), as well as satisfactory performance under
the current SMPIII, the FGS policy commitment remains strong and capacity
is strengthening. We are hopeful that following the satisfactory completion of SMP III,
which will expire in the Spring 2019, a successor IMF program could be
designed to meet the conditionality of an Upper Credit Tranche (UCT)
arrangement and pave the way to move Somalia toward the Decision Point
under the HIPC Initiative.
“The IMF stands ready to continue supporting Somalia’s reform agenda and
capacity development needs by intensifying technical assistance and
training in areas of its expertise, particularly on (1) budget preparation
and administration; (2) public financial management, including treasury,
arrears, and debt management; (3) tax policy and administration; (4)
national accounts and government financial statistics; (5) AML/CFT and
correspondent banking relationship; (6) banking licensing and supervision;
and (7) central bank organization and currency reform.
“During the visit, the team met with the Finance Minister, Mr. Abdirahman
Duale Beileh; Central Bank Governor, Mr. Bashir Issa Ali; and other
officials. The team also met with representatives of bilateral and
multilateral donors present in Nairobi and updated them on the performance
under the SMP and discussed coordination efforts on capacity building
activities. The team appreciates the candid discussions with the
authorities and is grateful for the information made available to staff.
Discussions also paved the ground for the next Article IV Consultation
visit that will be combined with the second and final review under SMP III
and negotiations of SMP IV, scheduled for early Summer 2019.”
