An International Monetary Fund (IMF) team led by Mohamad Elhage visited
Nairobi, Kenya from May 15-19 to conduct discussions on the second and
final review of the SMP and a follow-up SMP. The team met with the Somali
authorities to discuss the latest economic developments and review
implementation of reforms under the SMP.
At the conclusion of the visit, Mr. Elhage issued the following statement:
“In February 2017, the IMF Executive Board concluded the second Article IV
Consultation with Somalia since 1989. At the same time, Somalia also
completed the first review of the SMP, marking another important milestone
in normalizing relations with international financial institutions. This
SMP had been approved by the IMF’s Managing Director at the request of the
Federal Government of Somalia (FGS) on May 27, 2016 (See Press Release No.
16/248). Cementing a further step toward normalization, in early February
2017, the Somali people held their second democratic and peaceful election
since the end of the civil war, sending a strong, positive signal to the
international community. We are encouraged by the pace of reforms to
restore key economic and financial institutions, and welcome the
authorities’ commitment to the reform agenda under the SMP.
“For 2016, the impact of the drought on economic activity was offset by
strong performance in the telecommunication, construction, and service
sectors. Economic growth is estimated at 3.2 percent. Due to higher food
prices, inflation increased to 2.3 percent from 1.4 percent in 2015. For
2017, as the drought is expected to continue, growth is projected to
decelerate to about 2.0 percent, and inflation to increase to above 3
percent. Government budgetary revenue and grants fell short of program
projections in 2016, leading to liquidity strains and accumulation of
arrears. The authorities took corrective measures to prevent new arrears
starting in 2017.
“Performance under the SMP is broadly satisfactory, especially in light of
the difficult domestic environment. By the end of 2016, all but one of the
structural benchmarks had been observed and five out of the six indicative
targets had been met. The target on new domestic arrears accumulation was
breached and revenue performance was weak. For March 2017, all the
quantitative targets and structural benchmarks were met. The authorities
are encouraged to speed up and deepen agreed reforms, particularly by
passing the needed laws such as the Communication Act.
“With the SMP having expired in April, the authorities requested a
follow-up SMP to continue supporting macroeconomic stability and capacity
development. Discussions on the new SMP followed the recent London
conference on Somalia, during which donors reaffirmed their support, noting
the successful election and progress on reforms, while also stressing the
urgent need to further improve governance, and advance and broaden reforms.
The authorities have updated their memorandum of economic and financial
policies (MEFP) for 2017-19, in which they outline important reform agenda.
“To reach their economic and financial goals, we believe that it is
essential that the authorities’ policies include the following structural
measures:
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Continue to develop capacity and institutions
. Despite recent progress, capacity to manage economic policies remain
low and institutions are still weak. The IMF will continue to provide
the authorities with the needed technical assistance and training in
its areas of expertise.
-
Implement a sound fiscal framework and advance public financial
management reforms.
Prudent budget preparation, renewed efforts to generate higher domestic
revenues, and improved cash management and expenditure controls will
improve budgetary execution and outturns.
-
Increase domestic revenues.
Broaden the tax base and enforce efficient collection of taxes and
customs, based on existing laws.
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Jump start financial sector activity.
Develop and implement a financial sector roadmap to address obstacles
to increased financial intermediation. Improve the financial sector
regulatory framework and enforcement mechanism. In this context,
expanding the regulatory umbrella to the mobile money sector will be
essential. We welcome the authorities’ continued progress on currency
reform.
“During the visit, the team met with Central Bank Governor Mr. Bashir Issa
Ali; Senior Advisor to the President’s office Mr. Balal Osman;
Representative of the Prime Minister’s office Mr. Abdi Abdullahi; and other
officials. The team also discussed the MEFP with Finance Minister Mr.
Abdirahman Duale Beileh. In addition, the team met representatives from
development partners. The team would like to thank the Somali authorities
for their cooperation and the open and productive discussions.”
