Press Release No. 22/418

IMF Executive Board Concludes 2022 Article IV Consultation and Fourth Review of the Extended Credit Facility for Somalia

December 7, 2022

• Somalia is currently facing a severe food crisis. Sustained support from international partners is needed for the immediate humanitarian response and to build resilience over time to climate shocks in order to prevent food crises in the future.
• Program performance has been strong, and the reform momentum has been maintained. Steady progress under the HIPC process would lay the ground for the Completion Point to be achieved in late 2023.
• To promote inclusive growth, further efforts are needed to build resilience to climate shocks, advance implementation of the national development plan, and promote financial deepening, while maintaining fiscal sustainability.

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the Somali authorities’ commitment to economic reforms and the HIPC process, notwithstanding the challenges arising from an acute food crisis. They called for continued efforts by the authorities and sustained support from international partners to address the humanitarian crisis and reduce climate vulnerability to prevent food crises in the future.

Directors positively noted that performance under the program has been strong and commended the authorities’ steady progress under the HIPC process that is laying the ground for the Completion Point to be achieved in late 2023. They encouraged the authorities to continue with the timely implementation of the remaining HIPC Completion Point Triggers and to finalize debt relief agreements with all creditors.

Directors praised the implementation of reforms to raise domestic revenues and called for further efforts on tax policy and administration reforms, including customs modernization and the new income tax law. Directors commended the improvement in public financial management and encouraged further progress on payroll integration and fiscal transparency. Such efforts are needed to ensure medium-term fiscal sustainability given Somalia’s very low tax ratio amid large development needs, and the expected shift to concessional financing at the Completion Point.

Directors appreciated the continued reforms to strengthen the central bank’s governance and legal frameworks, including implementation of IMF Safeguards recommendations. They recommended further bolstering the central bank’s financial regulation and supervision capacity.

Directors noted that important steps have been taken on governance. They encouraged continued efforts to address ML/FT risks and ensure the enactment of the Targeted Financial Sanctions Law. Directors stressed the importance of finalizing the legal framework for the extractive industries, developing better control of government lands and real estate, and implementing the National Anti-Corruption Strategy.

Beyond the HIPC Completion Point, Directors stressed the need for further reforms to promote inclusive growth. These include building resilience to climate shocks, advancing implementation of the national development plan, and promoting financial deepening and inclusion, while maintaining fiscal sustainability. Directors noted that support from development partners is important for the successful implementation of the authorities’ reform strategy, including continued IMF CD support and financing from partners for the Somalia Country Fund.

It is expected that the next Article IV consultation with Somalia will be held in accordance with the Executive Board decision on consultation cycles for members with Fund arrangements.