On June 20, the management of the IMF completed the second and final review
under the second 12-month Staff-Monitored Program (SMP II) with Somalia,
and the Managing Director of the IMF approved a third 12-month SMP (SMP
III) covering the period May 2018–April 2019. The SMPs for Somalia are
designed to help maintain macroeconomic stability, rebuild key economic
institutions, and build track record on policy and reform implementation.
Recent developments are broadly favorable despite difficult political and
security environment. Economic activity is rebounding from the effects of
the drought in 2017. Reflecting a strong rainy season, sustained
remittances and grant inflows, growth in 2018 is projected to increase to
3.1 percent from an estimated 2.3 percent in 2017, and inflation is
expected to ease to under 3 percent from about 5.1 in 2017.
Reflecting ongoing reforms, the fiscal position has improved since December
2017. The federal government of Somalia (FGS) recorded a small fiscal
surplus in 2017 as a result of
higher-than-programmed domestic revenue mobilization and budgetary grant
disbursements. The strong fiscal performance continued through March 2018
due, in part, to lower-than-projected expenditure and slightly higher domestic revenue.
Program implementation under SMP II has been satisfactory. For December
2017, all indicative targets (ITs) and all but one structural benchmark
(SB) were met. Also, the two SBs and all ITs set for March 2018 were met.
Considering the satisfactory performance under SMP II and the authorities’
strong commitment to accelerate and broaden the reform agenda, staff
supports the completion of the second and final review under SMP II and the
authorities’ request for SMP III.
Staff also supports the authorities’ ongoing efforts to launch a new
national currency. After nearly two years of the IMF’s technical assistance
support, the pre-conditions for the launch of the new Somali Shilling have
been nearly completed. In March 2018, IMF staff prepared an assessment
letter supporting the CBS’s initiative to issue a new national currency.
Staff encourages the authorities to continue to reach out to donors to
raise the needed funds for this operation, finalize the establishment of
the accountability framework, and to fully staff the team that will manage
the process.
SMP III will build on achievements under the previous two SMPs and will
continue to lay the foundation so that Somalia will eventually have a SMP
that meets the IMF Upper Credit Tranche (UCT) conditionality which is one
of the key requirements for Somalia to reach the Decision Point under the
Heavily Indebted Poor Countries (HIPC) initiative. SMP III will focus on
broadening and deepening reform implementation to maintain macroeconomic
stability and to continue rebuilding institutions and capacity to improve
macroeconomic management and governance.
Risks to the program are elevated. Nonetheless, continued commitment to the
reform measures under the SMP; and with sustained donors support,
particularly on technical assistance, peace and state building, resilience
and humanitarian aid, will help mitigate these risks.
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Somalia: Selected Economic and Financial Indicators,
2015–20
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(IMF Quota = SDR 44.20 million; Population:
13 million, 2015 estimate)
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(Poverty Rate: n.a.; Main Export:
Livestock)
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Est.
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Proj.
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2015
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2016
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2017
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2018
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2019
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2020
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National income and prices
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Nominal GDP in millions of U.S. dollars
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6,659
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6,767
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7,052
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7,405
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7,822
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8,256
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Real GDP, annual percentage change
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3.9
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4.4
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2.3
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3.1
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3.5
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3.5
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Per capita GDP in U.S. dollars
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511
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504
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511
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521
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535
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549
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Consumer prices (e.o.p., percent change)
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-1.2
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0.0
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5.3
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2.8
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2.5
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2.5
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(Percent of GDP)
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Central government finances 1/
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Revenue and grants
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2.1
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2.5
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3.5
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3.5
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3.7
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3.8
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of which:
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Grants
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0.4
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0.9
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1.5
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1.3
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1.3
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1.3
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Expenditure, of which:
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2.0
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2.5
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3.5
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3.5
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3.7
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3.8
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Compensation of employees
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0.8
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0.8
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1.8
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1.8
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1.8
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1.8
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Purchase of non-financial assets
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0.0
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0.1
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0.1
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0.1
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0.2
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0.2
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Overall balance
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0.1
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0.0
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0.0
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0.0
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0.0
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0.1
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Stock of domestic arrears
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1.0
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1.1
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1.0
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0.9
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0.7
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0.5
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(Millions of U.S. Dollars)
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Central bank summary balances
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Foreign assets (gross)
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68.6
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60.9
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89.2
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…
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…
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…
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Net foreign assets, excl. IMF 2/
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21.6
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21.6
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24.0
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…
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…
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…
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FGS, total deposits 3/
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19.1
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12.1
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33.6
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…
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…
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…
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(Percent of GDP)
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Balance of payments
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Current account balance
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-4.7
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-6.3
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-6.6
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-6.3
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-5.7
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-5.6
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Trade balance
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-45.1
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-46.8
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-55.2
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-48.3
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-46.8
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-46.4
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Exports of goods and services
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15.6
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15.1
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11.5
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14.6
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15.0
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14.8
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Imports of goods and services
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60.6
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61.8
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66.7
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62.9
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61.8
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61.2
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Remittances
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19.5
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19.7
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23.5
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20.4
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20.5
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20.7
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Grants
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21.2
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21.1
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25.6
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22.0
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21.0
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20.6
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Foreign Direct Investment
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4.5
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4.9
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5.2
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5.5
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5.7
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5.6
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External debt
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66.3
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64.7
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65.0
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…
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…
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…
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Market exchange rate
(SOS/USD, e.o.p.)
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22,285
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24,005
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23,605
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…
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…
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…
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Sources: Somali authorities; and Fund staff
estimates and projections.
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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.
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2/ Program definition. Excludes position in
the SDR Department and obligations to the
IMF.
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3/ Includes Treasury deposits at the CBS
and grants held in external accounts on
behalf of the Ministry of Finance.
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