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

IMF News, December 7, 2022

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

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.

The Executive Board completed the fourth review of the Extended Credit Facility (ECF) arrangement for Somalia on December 5, 2022.
Immediate disbursement approved: SDR 7 million (about US$ 8.9 million).
Total disbursements under the ECF and the EFF to date: SDR 278.4 million (about US$ 393.2 million).
Somalia’s ECF arrangement was originally approved on March 25, 2020, as part of a three-year blended arrangement under the ECF and the EFF.
Original access: SDR 252.86 million (155 percent of quota) under the ECF and SDR 39.57 million (24 percent of quota) under the EFF.
The full amount of the EFF arrangement was made available on approval and drawn at the first purchase; the EFF arrangement lapsed immediately.

Program performance has been strong, and the reform momentum has been maintained.
Steady progress under the HIPC process is laying the ground for the Completion Point to be achieved in late 2023.
Directors encouraged timely implementation of the remaining HIPC Completion Point Triggers and finalization of debt relief agreements with all creditors.
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.

Directors praised 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.
Improvement in public financial management was commended; Directors encouraged further progress on payroll integration and fiscal transparency.
Rationale: 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 continued reforms to strengthen the central bank’s governance and legal frameworks, including implementation of IMF Safeguards recommendations.
Recommended further bolstering of the central bank’s financial regulation and supervision capacity.
Directors stressed the importance of promoting financial deepening and inclusion to support inclusive growth.

Important steps have been taken on governance.
Directors encouraged continued efforts to address ML/FT risks and ensure the enactment of the Targeted Financial Sanctions Law.
Stressed priorities: finalize the legal framework for the extractive industries, develop better control of government lands and real estate, and implement the National Anti-Corruption Strategy.

Continued efforts by the authorities and sustained support from international partners are needed to address the humanitarian crisis and reduce climate vulnerability.
Beyond the HIPC Completion Point, further reforms are needed to promote inclusive growth: build resilience to climate shocks, advance implementation of the national development plan, and promote 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.

Press Release No. 22/418 — December 7, 2022 — IMF Communications Department