IMF Staff Completes First Review under the Staff-Monitored Program for Somalia

IMF News, September 18, 2019

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Published: September 18, 2019

Mission and scope

IMF staff team led by Allison Holland visited Addis Ababa, Ethiopia, from September 10 to 13 to meet with Somali authorities and undertake the first review under the fourth successive Staff-Monitored Program (SMP IV).
SMP IV covers May 2019 - July 2020.
Reforms under SMP IV focus on: mobilizing revenues (including across the Federal Member States), strengthening public financial management, enhancing financial sector stability, and strengthening compliance with the framework for anti-money laundering/combatting the financing of terrorism.

Key economic projections

Economic growth is projected to remain broadly stable at 2.9 percent in 2019.
Inflation is projected to increase temporarily to 4.0 percent in 2019 due to higher food prices as a result of poor rainfall earlier in the year.
Key risks to the outlook: the difficult security situation and vulnerability to climate shocks.

Fiscal performance and reforms

Domestic revenue mobilization in the year to July 2019 exceeded the target set in the program.
Authorities plan to revise up their projection for domestic revenue for 2019 in the forthcoming supplementary budget to reflect stronger performance.
The government has decided to set aside some specific savings to ensure critical expenditures can be met even in the event of unexpected revenue shortfalls.
IMF staff welcomes the new mobile money regulations as an important step in protecting financial stability.

Structural benchmarks, HIPC, and Poverty Reduction Strategy

All structural benchmarks for the first review—identified as the reform measures critical for achieving the goals of SMP IV—have been met.
Progress is being made towards meeting structural benchmarks set for the second review, although risks remain.
The IMF team notes the stated commitment of the Finance Ministers of all the Federal Member States (FMS), together with the Federal Government (FGS), to securing debt relief under the HIPC Initiative despite broader political differences.
Authorities’ work on their 9th National Development Plan, which they intend to meet the HIPC requirement for a Poverty Reduction Strategy, is close to completion.
To reach the Decision Point (DP) under the HIPC Initiative as soon as possible, strong support from the international community will be critical to secure financing needed to clear Somalia’s arrears to the international financial institutions (IFIs) and debt relief.

Risks, recommendations, and conditionality

The agreement on completion of the first review is at staff-level and is subject to approval by IMF’s management.
Authorities will need to maintain their commitment to the reforms outlined under SMP IV to establish the policy track record required to reach the HIPC DP.
The IMF team encourages continued cooperation between the FGS and FMS to mitigate key risks to the program.

Meetings and outreach

During the visit, the team met with: Finance Minister Mr. Abdirahman Duale Beileh; Minister of Planning, Investment and Economic Development Mr. Gamal Hassan; Central Bank Governor Mr. Abdirahman Mohamed Abdullahi; and other officials.
The team met and briefed parliamentarians, donors and other stakeholders on Somalia’s performance under the SMP.
In cooperation with World Bank and European Union partners, the team invited Finance Ministers of the Federal Member States to a workshop on September 14 on Somalia’s economic challenges and prospects, including for debt relief under the HIPC Initiative.

Media contact

MEDIA RELATIONS, PRESS OFFICER: Wafa Amr
Phone: +1 202 623-7100
Email: MEDIA@IMF.org
@IMFSpokesperson

Press Release No. 19/339 — September 18, 2019. The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.