IMF Executive Board Concludes Fifth Review of the Extended Credit Facility for Somalia

IMF News, May 19, 2023

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Canonical URL: IMF Executive Board Concludes Fifth Review of the Extended Credit Facility for Somalia

The Executive Board completed the fifth review of the Extended Credit Facility (ECF) arrangement for Somalia on May 17, 2023.
The completion of the review enables an immediate disbursement of SDR 7 million (about US$ 9.4 million).
Somalia’s total disbursement under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) is SDR 285.4 million (about US$ 386.1 million).
The Executive Board approved a waiver of non-observance for the December 2022 performance criterion on spending on compensation of employees, goods and services, and contingency, based on corrective measures in the supplementary budget for 2023.
The Executive Board approved a fourth HIPC interim assistance in the amount of SDR 2.211 million to cover 100 percent of Somalia’s eligible debt service to the IMF that falls due between June 17, 2023 and June 16, 2024 or the HIPC Completion Point, whichever is earlier.
The Executive Board’s decision was taken on a lapse-of-time basis.

Somalia’s ECF arrangement was originally approved by the Executive Board on March 25, 2020 as part of a three-year blended arrangement under the ECF and the EFF.
The original blended arrangement involved access of SDR 252.86 million (155 percent of quota) under the ECF and SDR 39.57 million (24 percent of quota) under the EFF.
As the full amount of the EFF arrangement was made available on approval and drawn at the first purchase, the EFF arrangement lapsed immediately.
The ECF arrangement supports the implementation of the authorities’ National Development Plan and anchors reforms between the Heavily Indebted Poor Countries (HIPC) Decision and Completion Points.

Program performance has been satisfactory despite significant challenges, including the continued severe food crisis.
Somalia’s authorities remain committed to economic reforms and the HIPC process, with the HIPC Completion Point appearing achievable by 2023Q4.
Economic activity has been weighed down by the drought and subdued remittances inflows.
The 2023 GDP growth projection was downgraded by ¼ percent to 2.8 percent.
Average inflation is expected to decline to 4.2 percent in 2023 as commodity prices recede.
Near-term risks are elevated, including:
- a worsening of the food crisis if healthy rains are not sustained in 2023 or if commodity prices increase;
- security challenges;
- political risks;
- policy slippages that could delay reaching the HIPC Completion Point.

The authorities are committed to advancing fiscal and institutional reforms, and normalizing relations with all external creditors.
Sustained efforts are needed to:
- strengthen domestic revenue mobilization to make room for priority spending;
- contain discretionary expenditure pressures.
Improvements are ongoing on public financial management, including on payroll integration.
Continued reforms are important to:
- improve AML/CFT;
- strengthen governance and transparency, including on procurement and concessions;
- strengthen Central Bank of Somalia institutional capacity and advance financial sector reforms.
Steady progress is needed to finalize the HIPC completion point triggers and achieve debt relief agreements with all creditors.

Timely financing and capacity development support from development partners is 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.

IMF press release: IMF Executive Board Concludes Fifth Review of the Extended Credit Facility for Somalia (May 19, 2023).