IMF Executive Board Completes the Second and Third Reviews of the Extended Credit Facility for Somalia

June 17, 2022

  • Notwithstanding the challenges over the past 18 months, Somalia’s IMF-supported program remains on track, with continued progress on key reforms, including on domestic revenue mobilization, strengthening public financial management, deepening of CBS capacity, and enhancing governance.
  • Support from development partners, both on financing and capacity development, is essential for the successful implementation of the authorities’ economic and structural reform strategy.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the second and third reviews of the Extended Credit Facility (ECF) arrangement for Somalia. The Board’s decision enables the immediate disbursement of SDR 14 million (about US$ 18.8 million), bringing Somalia’s total disbursement under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) to SDR 271.4 million (about US$ 384.3 million). 

Somalia’s ECF arrangement was originally approved by the Executive Board on March 25, 2020 (see Press Release No. 20/105) as part of a three-year blended arrangement under the ECF and the EFF, which involved access of SDR 252.86 million (155 percent of quota) under the ECF and SDR 39.57 million (24 percent of quota) under the EFF. As the full amount of the EFF arrangement was made available on approval and drawn at the first purchase, the EFF arrangement lapsed immediately. The ECF arrangement supports the implementation of the authorities’ National Development Plan and anchors reforms between the HIPC Decision and Completion Points.

Following the Executive Board discussion, Ms. Antoinette Sayeh, Deputy Managing Director and Acting Chair, made the following statement:

“The Somali authorities have preserved macroeconomic stability and maintained the reform momentum, notwithstanding multiple shocks. In addition to the challenges from Covid-19 and the protracted elections process, food security and economic activity are under strain because of severe drought conditions, compounded by rising global food and energy prices. The authorities’ have made skillful efforts to navigate these challenges, supported by the international community, including the 2021 General SDR allocation. 

“The authorities maintain a steadfast commitment to the reform agenda under the ECF-supported program and the HIPC process, which is critical to build resilience, promote inclusive growth, and reduce poverty. The authorities’ ongoing efforts to strengthen domestic revenue mobilization and public financial management are commendable. Continued improvements in the institutional capacity of the Central Bank of Somalia are welcome. It will be important to continue to advance reforms to improve AML/CFT and governance. Sustained efforts are needed to finalize the HIPC completion point triggers and achieve debt relief agreements with all creditors.

“Support from development partners, both on financing and capacity development, is important for the successful implementation of the authorities’ reform strategy. Contributions from Somalia’s partners to the Somalia Country Fund are also needed to ensure smooth delivery of IMF technical assistance to support the goals of the ECF-supported program and the HIPC Initiative.”

 

Table 1. Somalia: Selected Economic Indicators, 2019–2027

Population: 15.2 million, 2021 estimate

Est.

Proj.

2019

2020

2021

2022

2023

2024

2025

2026

2027

National income and prices

Nominal GDP in millions of U.S. dollars

6,477

6,965

7,373

8,202

8,839

9,621

10,498

11,461

12,485

Real GDP in millions of U.S. dollars

6,016

5,996

6,115

6,281

6,507

6,747

7,011

7,291

7,590

Real GDP, annual percentage change

3.3

-0.3

2.0

2.7

3.6

3.7

3.9

4.0

4.1

Real GDP per capita in U.S. dollars

419

406

403

402

405

409

413

418

425

CPI (period average, percent change)

4.5

4.3

4.6

8.5

3.6

3.8

3.7

3.5

3.3

CPI (e.o.p., percent change)

3.1

4.8

5.7

7.8

3.5

3.7

3.6

3.4

3.2

Central government finances 1/

Revenue and grants

5.2

7.1

5.1

6.7

6.7

4.2

4.6

5.0

5.3

of which:

Tax

2.4

2.0

2.2

2.1

2.4

2.7

3.1

3.4

3.7

Grants 2/

1.7

4.1

2.0

3.6

3.3

0.5

0.5

0.5

0.4

Expenditure (FGS)

4.9

6.8

6.2

7.0

6.8

6.1

6.4

6.7

6.8

Compensation of employees 3/

2.5

3.3

3.4

3.2

3.1

2.9

3.1

3.2

3.3

Purchase of non-financial assets

0.2

0.3

0.2

0.3

0.3

0.5

0.5

0.6

0.7

Overall balance

0.4

0.4

-1.1

-0.3

-0.1

-1.9

-1.8

-1.7

-1.5

Net change in the stock of cash

0.4

0.2

-0.3

0.1

-0.2

0.0

0.0

0.0

0.0

Stock of domestic arrears

1.0

1.0

0.9

0.8

0.8

0.7

0.6

0.5

0.4

Public debt 4/, 5/

83.0

57.1

47.5

43.8

7.3

9.7

10.6

11.3

11.8

Monetary Sector

Net Foreign Assets

1.9

-2.7

-3.3

-4.3

-0.1

-0.3

-0.2

-0.1

-0.1

Central Bank claims on non-residents 6/

2.3

2.8

3.0

3.3

3.0

2.5

2.3

2.1

1.9

Net Dometic Assets

6.2

13.9

14.9

14.3

10.3

10.9

11.6

12.7

13.3

Credit to the private Sector

3.2

3.1

3.5

3.9

4.5

5.4

6.6

8.2

9.7

Broad Money 7/

8.1

11.1

11.6

10.0

10.2

10.6

11.4

12.6

13.3

Net Foreign Assets (Program Definition, in millions of U.S. dollars)

25

80

175

…

…

…

…

…

…

Balance of payments

Current account balance

-10.4

-10.8

-15.0

-14.3

-12.4

-12.6

-13.6

-13.5

-13.5

Trade balance

-63.7

-63.4

-70.7

-71.0

-69.5

-68.0

-67.9

-67.8

-67.8

Exports of goods and services

17.3

13.9

17.4

16.9

16.9

17.2

17.2

17.2

17.2

Imports of goods and services

81.0

77.3

88.1

87.9

86.5

85.2

85.1

85.0

85.0

Remittances

24.4

23.2

28.2

29.1

28.9

28.9

28.4

28.4

28.4

Grants

29.4

29.9

28.0

28.2

28.7

26.9

26.3

26.3

26.3

Foreign Direct Investment

6.9

7.7

7.9

7.8

7.8

7.8

7.8

8.0

8.0

External debt 8/

82.0

56.5

46.8

42.3

6.5

9.1

10.1

10.8

11.4

Sources: Somali authorities; and Fund staff estimates and projections.

1/ Budget data for the Federal Government of Somalia. Fiscal operations are recorded on a cash basis. GDP data cover the entire territory of Somalia.

2/ A change in World Bank policy for countries with moderate risk of debt distress that replaces the previous 50:50 mix of grants and loans with 100 percent loans (with 50-year maturity), will impact Somalia starting in 2024 because after reaching HIPC Completion Point in 2023, Somalia would be assessed as having a moderate risk of debt distress. Lower grants would result in deficits of 1.5 to 2.0 percent of GDP, higher than the ones projected under the alternative before this policy change. The difference with previous deficit projections would dissipate over time as the previous deficit projections already incorporated a gradual shift away from grants to loans.

3/ The increase in compensation of employees in 2020 reflects a reallocation of allowances from G&S to compensation in the context of Somali National Army reform.

4/ Assumes application of HIPC debt relief and interim HIPC assistance from the Decision Point, and MDRI and "beyond-HIPC" relief at Completion Point in 2023.

5/ Public debt includes arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt. Consistent with the public debt definition in the DSA. It includes net SDR position of the FGS.

6/ Includes FGS grants held abroad.

7/ Primarily desposits at commercial banks. Data before 2020 does not yet include balances held with MMOs.

8/ Consistent with the DSA external debt definition, which reflects the external debt of the country as a whole. Includes the total net SDR position of the central bank. This differs from public external debt reported in Tables 2A, 2B, and 10.

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