## IMF Reaches Staff-Level Agreement on a Second Staff-Monitored Program with Somalia

_IMF News, May 22, 2017_

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## Bibliographic details
- Published: May 22, 2017

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### Mission summary
- An IMF team led by Mohamad Elhage visited Nairobi, Kenya from May 15-19 to conduct discussions on the second and final review of the Staff-Monitored Program (SMP) and a follow-up SMP.
- The mission concluded with a staff-level agreement on the completion of the second and final review of the SMP and on a second SMP.
- 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.

### Recent political and institutional context
- In early February 2017, the Somali people held their second democratic and peaceful election since the end of the civil war.
- The SMP had been approved by the IMF’s Managing Director at the request of the Federal Government of Somalia (FGS) on May 27, 2016 (Press Release No. 16/248).
- 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, where donors reaffirmed support and stressed the urgent need to further improve governance, and advance and broaden reforms.

### Economic performance and projections
- 2016 economic growth is estimated at 3.2 percent.
- Inflation in 2016 increased to 2.3 percent from 1.4 percent in 2015, driven by higher food prices.
- For 2017, growth is projected to decelerate to about 2.0 percent, as the drought is expected to continue.
- For 2017, inflation is projected 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; authorities took corrective measures to prevent new arrears starting in 2017.
- Sectoral performance in 2016: strong performance in the telecommunication, construction, and service sectors offset the impact of the drought on economic activity.

### Assessment of SMP implementation
- Performance under the SMP is described as broadly satisfactory given the difficult domestic environment.
- By the end of 2016:
  - All but one of the structural benchmarks had been observed.
  - Five out of the six indicative targets had been met.
  - The target on new domestic arrears accumulation was breached.
  - 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.
- The IMF welcomes the authorities’ continued progress on currency reform.

### IMF recommendations and priorities (structural measures)
- Continue to develop capacity and institutions.
  - Despite recent progress, capacity to manage economic policies remains low and institutions are still weak.
  - The IMF will continue to provide technical assistance and training in its areas of expertise.
- Implement a sound fiscal framework and advance public financial management reforms.
  - Emphasize prudent budget preparation, renewed efforts to generate higher domestic revenues, and improved cash management and expenditure controls to improve budgetary execution and outturns.
- Increase domestic revenues.
  - Broaden the tax base and enforce efficient collection of taxes and customs, based on existing laws.
- 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.
  - Expand the regulatory umbrella to the mobile money sector.
- Continue to advance currency reform.

### Meetings and acknowledgments
- 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;
  - Finance Minister Mr. Abdirahman Duale Beileh (discussed the MEFP);
  - Representatives from development partners.
- The team expressed thanks to the Somali authorities for their cooperation and the open and productive discussions.

*IMF Press Release No. 17/186 — May 22, 2017*

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## References

- [Somalia and the IMF](http://www.imf.org/external/country/SOM/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2017/05/22/pr17186-imf-reaches-staff-level-agreement-on-a-second-staff-monitored-program-with-somalia_