On February 5, 2019, the Management of the IMF completed the first
review under the third 12-month Staff-Monitored Program (SMP III)
[1] with Somalia, which covers the period May 2018–April 2019. This current
SMP, together with the previous two SMPs (covering May 2016 to April
2018), has been designed to help guide the Somali authorities as they
rebuild key economic institutions and undertake critical policy reforms
to re-establish macroeconomic stability and establish a track record on
sound policy and reform implementation
Thanks to the authorities’ strong commitment, program implementation has
been satisfactory, and capacity continues to strengthen, despite a
challenging environment.
Somalia’s economy is recovering but further efforts are needed to secure
economic resilience and reduce poverty. Since 2017, growth has rebounded,
inflation has slowed, and the trade deficit has narrowed. For 2018, real
GDP growth is projected at 3.1 percent and end-year inflation at 3.5
percent. The exchange rate has remained stable. But further efforts are
needed to improve economic conditions, increase employment and make a
significant reduction in poverty. Development and humanitarian partners are
working with the authorities on enhancing the country’s resilience.
Nevertheless, risks to the outlook and program remain.
The authorities’ efforts to improve domestic revenue mobilization has
strengthened revenue performance. This reflects efforts to broaden the tax
base, and to develop the tax policy framework and administrative capacity
to collect taxes. Data through November 2018 show that domestic revenue
reached $161 million (31 percent higher than the same period in 2017), and
the overall cash fiscal position was in surplus by $8 million. New budget
support grants from the EU and the World Bank are increasing grant revenues
and providing further support for reforms and social transfers. Staff
commends the authorities for their concerted efforts to improve domestic
revenue mobilization.
Bold steps to strengthen public financial management need to continue.
Reforms to improve the fiscal framework are ongoing, and the authorities
continue to exhibit greater fiscal discipline and are implementing regular
monthly fiscal operations reporting.
The authorities’ stepped-up efforts to develop the financial sector are
welcome. Staff encourages continued progress on implementing the
authorities’ action plan (the Financial Sector Roadmap) for reforming and
developing the financial sector. Staff urges the rapid implementation of
planned changes to the organizational and governance structure of the
Central Bank of Somalia. Staff urges the authorities to bring the mobile
money sector under its supervisory and regulatory umbrella as soon as
possible. Finally, compliance with anti‑money laundering and combatting the
financing of terrorism (AML/CFT) regulations must be improved and
identified gaps in the framework addressed.
The authorities need to complete a number of additional preparatory steps
before launching the first phase of the currency reform. These include
securing the needed funds and operational support; operationalizing the
accountability framework; and completing the detailed project timeline and
communications strategy.
Staff encourages the Somali authorities to sustain their reform momentum.
The successful completion of the first two 12-month SMPs (from May 2016 to
April 2018), as well as satisfactory performance under the current SMP III,
reflects the strength of the authorities’ policy and reform commitment.
This continued commitment will help pave the way towards securing the
necessary support, including from donors, for eventual debt relief and
arrears clearance under the HIPC Initiative.
Staff urges the authorities to begin the process of securing the necessary
financial assurances to cover the costs of both HIPC debt relief and
clearing arrears to the international financial institutions.
Somalia: Selected Economic and Financial Indicators, 2015–20
(IMF Quota = SDR 44.20 million; Population: 13 million, 2015 estimate)
(Main Export: Livestock)
|
|
Est.
|
|
Proj.
|
|
|
2015
|
2016
|
2017
|
|
2018
|
2019
|
2020
|
|
National income and prices
|
|
|
|
|
|
|
|
|
Nominal GDP in millions of U.S. dollars
|
6,669
|
6,840
|
7,128
|
|
7,484
|
7,907
|
8,345
|
|
Real GDP, annual percentage change
|
3.9
|
4.9
|
2.3
|
|
3.1
|
3.5
|
3.5
|
|
Per capita GDP in U.S. dollars
|
511
|
510
|
516
|
|
527
|
541
|
555
|
|
Consumer prices (e.o.p., percent change)
|
0.6
|
0.7
|
5.3
|
|
3.5
|
3.0
|
2.8
|
|
|
(Percent of GDP)
|
|
|
|
Central government finances 1/
|
|
|
|
|
|
|
|
|
Revenue and grants
|
2.1
|
2.5
|
3.5
|
|
3.7
|
4.3
|
4.4
|
|
of which:
|
|
|
|
|
|
|
|
|
Grants
|
0.4
|
0.9
|
1.5
|
|
1.5
|
1.8
|
1.7
|
|
Expenditure, of which:
|
2.0
|
2.5
|
3.4
|
|
3.7
|
4.1
|
4.3
|
|
Compensation of employees 2/
|
0.8
|
0.8
|
1.8
|
|
1.9
|
2.0
|
2.0
|
|
Purchase of non-financial assets
|
0.0
|
0.1
|
0.1
|
|
0.1
|
0.3
|
0.3
|
|
Overall balance
|
0.1
|
0.0
|
0.0
|
|
0.0
|
0.1
|
0.1
|
|
Stock of domestic arrears
|
1.0
|
1.1
|
1.0
|
|
0.9
|
0.6
|
0.4
|
|
|
(Millions of U.S. Dollars)
|
|
|
|
Central bank summary balances
|
|
|
|
|
|
|
|
|
Foreign assets (gross)
|
68.6
|
60.9
|
89.2
|
|
…
|
…
|
…
|
|
Net foreign assets, excl. IMF 3/
|
21.6
|
21.6
|
24.0
|
|
…
|
…
|
…
|
|
CBS liabilities to govt 4/
|
7.2
|
5.4
|
29.3
|
|
…
|
…
|
…
|
|
|
(Percent of GDP)
|
|
|
|
Balance of payments
|
|
|
|
|
|
|
|
|
Current account balance
|
-4.4
|
-5.9
|
-5.6
|
|
-5.6
|
-5.3
|
-5.2
|
|
Trade balance
|
-45.0
|
-45.9
|
-55.3
|
|
-50.9
|
-49.2
|
-47.8
|
|
Exports of goods and services
|
15.6
|
15.5
|
13.3
|
|
16.1
|
16.6
|
16.4
|
|
Imports of goods and services
|
60.5
|
61.3
|
68.6
|
|
67.1
|
65.7
|
64.1
|
|
Remittances
|
19.9
|
20.0
|
21.4
|
|
19.1
|
19.3
|
19.5
|
|
Grants
|
21.2
|
20.4
|
28.7
|
|
26.6
|
25.0
|
23.6
|
|
Foreign Direct Investment
|
4.5
|
4.8
|
5.2
|
|
5.5
|
5.7
|
5.6
|
|
External debt
|
68.2
|
66.0
|
65.5
|
|
…
|
…
|
…
|
|
Market exchange rate (SOS/USD, e.o.p.)
|
22,285
|
24,005
|
23,605
|
|
…
|
…
|
…
|
|
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.
|
|
|
|
2/ Increase in compensation of employees in 2017
reflects the bringing onto budget military spending
related to the loss of an
off-budget grant.
|
|
3/ Program definition. Excludes position in the SDR
Department and obligations to the IMF.
|
|
4/ Includes grants and other Treasury deposits.
|
[1]
An SMP is an agreement between country authorities and Fund staff
to monitor the implementation of the authorities’ economic program.
SMPs do not entail endorsement by the IMF Executive Board. The SMP
is supported by quantitative performance measures, indicative
targets and structural measures.
