## IMF Staff Completes Staff-Level Agreement on the Fifth Review of the Extended Credit Facility Arrangement for Somalia

_IMF News, March 20, 2023_

## Source details

**Canonical URL:** [IMF Staff Completes Staff-Level Agreement on the Fifth Review of the Extended Credit Facility Arrangement for Somalia](https://www.imf.org/en/news/articles/2023/03/20/pr2382-imf-staff-completes-sla-fifth-review-ecf-arr-somalia)

## Other formats

- [Markdown version](/en/news/articles/2023/03/20/pr2382-imf-staff-completes-sla-fifth-review-ecf-arr-somalia/index.md)
- [Structured JSON version](/en/news/articles/2023/03/20/pr2382-imf-staff-completes-sla-fifth-review-ecf-arr-somalia/index.json)
- [Bundle manifest](/en/news/articles/2023/03/20/pr2382-imf-staff-completes-sla-fifth-review-ecf-arr-somalia/bundle-manifest.json)

## Bibliographic details
- Published: March 20, 2023

---

### Mission and staff-level agreement
- An IMF team, led by Laura Jaramillo, conducted discussions with the Somali authorities in Nairobi on March 7-14, 2023 and reached a staff-level agreement on the fifth review under the Extended Credit Facility (ECF) arrangement.
- The staff-level agreement is subject to approval of the IMF’s Executive Board.
- Press Release No. 23/82; March 20, 2023.
- End-of-Mission statement: views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

### Humanitarian situation and near-term risks
- Persistent drought has caused acute food insecurity in some areas.
- Donor-supported assistance: close to 7.3 million people are getting some form of assistance.
- Risk scenario: half of the population would face acute food insecurity by June 2023 if the April-June rainy season disappoints and financing of humanitarian support is not adequate.
- Near-term macroeconomic risks remain elevated, including a worsening of the food crisis if healthy rains do not resume in 2023 or if commodity prices rise further.

### Macroeconomic developments and outlook
- GDP growth: the GDP growth estimate for 2022 and projections for 2023 were downgraded by ¼ percent to 1.7 percent and 2.8 percent, respectively, due to the prolonged drought and subdued remittance inflows.
- Inflation: Average inflation reached 6.8 percent in 2022; expected to decline to 4.2 percent in 2023 as commodity prices recede.
- Growth has been weighed down by the drought and slowing global growth; risks remain elevated.

### Fiscal policy, budgeting, and revenue mobilization
- Authorities committed to continue improving revenue collection and make room for priority spending while containing discretionary expenditure pressures.
- The authorities will submit to Parliament a Supplementary Budget for 2023 that presents a balanced fiscal position based on realistic revenues.
- The Supplementary Budget will:
  - accommodate expenditure supportive of growth, security, and development—including security sector compensation and provisions and the hiring of new teachers;
  - scale back other discretionary spending.
- External budget support remains crucial.
- Ongoing domestic revenue mobilization reforms include customs modernization, a new income tax law, and increasing revenue collection from large businesses, including the telecom sector.

### Public financial management and public sector reforms
- Public financial management has been strengthened; ongoing improvements include:
  - integrating all employees in the payroll system;
  - fiscal reporting enhancements;
  - procurement improvements;
  - management of non-financial assets.
- Progress has been made on the petroleum sector legal framework.
- Authorities will take steps to strengthen the strategic and oversight role of the Inter-Ministerial Concessions Committee over government contracts and concessions.

### Financial sector and Central Bank of Somalia (CBS) reforms
- The CBS is advancing institutional governance and financial sector reforms.
- Progress on financial sector infrastructure improvements.
- CBS will continue to enhance the regulatory framework and strengthen capacity in risk-based supervision, including through legislation and preparation of risk-based prudential regulations.
- Measures to address money laundering/financing of terrorism risks include the recent enactment of the Targeted Financial Sanctions Law; further efforts will continue to be needed.

### HIPC process, legislation, and debt relief
- Authorities’ steady progress under the Heavily Indebted Poor Countries (HIPC) process is important to lay the ground for achieving the Completion Point in late 2023; the HIPC Completion Point appears achievable by 2023Q4.
- Recent parliamentary approvals of key legislation include:
  - the Electricity Act;
  - the Extractive Industries Income Tax Law;
  - the Data Protection Law;
  - the Targeted Financial Sanctions Law;
  - the Digital ID System Law;
  - the Investment and Investor Protection Act;
  - the Federal Law on Fisheries.
- Debt relief agreements have been reached with most Paris Club members and the Kuwait Fund for Arab Economic Development (KFAED); authorities continue to seek agreements with other bilateral creditors.

### International support and capacity development
- Timely financing and capacity development support from development partners are essential for successful implementation of the authorities’ reform strategy.
- Contributions from Somalia’s partners to the Somalia Country Fund are critical to ensure smooth delivery of IMF technical assistance to support the goals of the ECF-supported program and the HIPC Initiative.
- Continued support from international partners is imperative to support the authorities’ policy efforts.

### Mission conclusion and acknowledgements
- Despite significant challenges, including the continued severe food crisis, Somalia has maintained strong reform momentum and program performance has been satisfactory.
- The mission thanked counterparts for a constructive and fruitful dialogue; meetings were held with the Minister of Finance, Minister of Planning, the Central Bank Governor, other government officials, and development partners.

*IMF Communications Department*

---


## References

- [Somalia and the IMF](http://www.imf.org/external/country/SOM/index.htm)
- [Heavily Indebted Poor Countries -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/debt-relief-under-the-heavily-indebted-poor-countries-initiative-hipc)
- [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/2023/03/20/pr2382-imf-staff-completes-sla-fifth-review-ecf-arr-somalia_