IMF, Somalia agree 36-month Extended Credit Facility arrangement
Mogadishu, Somalia (PANA) - An International Monetary Fund (IMF) team and the Somali authorities have reached a staff-level agreement on economic policies and reforms to be supported by a new 36-month arrangement of about US$100 million under the Extended Credit Facility (ECF).
According to the IMF, Somalia has maintained strong implementation of wide-ranging reforms to help strengthen key economic and financial policy institutions, which is paving the way for the country to reach debt relief at the Heavily Indebted Poor Countries (HIPC) Completion Point in December 2023.
Building on this progress, the Somali authorities and IMF staff have reached a staff-level agreement on economic policies and reforms to be supported by a new ECF arrangement.
Somalia’s programme aims to guide post-HIPC policies to further strengthen key economic institutions and promote macroeconomic stability and growth, in line with the national development plan and the government’s long-term vision. Continued support from international partners is essential to support these efforts.
An IMF team, led by Ms. Laura Jaramillo, conducted discussions with the Somali authorities in Nairobi, Kenya during 11-22 September, 2023 and 22-24 October, 2023 and reached a staff-level agreement on economic policies and reforms. This agreement is subject to approval by the IMF’s Executive Board.
At the conclusion of the discussions, Ms. Jaramillo remarked: “Somalia has made considerable progress in rebuilding its economy and institutions. Under the current ECF-supported programme, in place since 2020, Somalia has maintained strong implementation of wide-ranging reforms to help strengthen key economic and financial policy institutions.
“This progress is paving the way for Somalia to reach the Heavily Indebted Poor Countries (HIPC) Completion Point in December 2023, at which point Somalia is expected to receive debt relief and move toward fully normalising relations with its key creditors.”
Despite the progress achieved, Somalia faces significant challenges ahead, including those stemming from economic, social, security, and climate risks. In 2022, an estimated 54 percent of the population was living on less than US$ 2.06 per day.
Growth is currently insufficient to reduce widespread poverty, address large social needs, and create sufficient jobs for the youth. Somalia is highly vulnerable to climate shocks that hurt growth and hinder poverty reduction efforts.
Faced with these challenges, the Somali authorities have requested a new 3-year IMF-supported programme under the ECF and the related capacity development support to enable the country to further strengthen key economic institutions and promote macroeconomic stability and growth.
Building on progress so far, post-HIPC policy priorities will be to maintain fiscal sustainability, increase domestic revenues and strengthen public financial management, promote financial deepening and financial inclusion, improve the business environment and governance, and enhance statistics.
According to the IMF, the authorities will take steps to strengthen capacity for public debt management and debt risk assessments—as Somalia is expected to face a structural shift in the size and composition of the Federal Government of Somalia (FGS) external financing following the HIPC Completion Point—and for public investment management. The FGS is expected to gradually scale up quality investment projects.
The authorities will also work, with support from the IMF, on formulating and implementing new monetary and exchange rate policy frameworks in the context of the currency reform to reintroduce the Somali shilling as legal tender.
Timely financing and capacity development support from development partners is essential for the successful implementation of the authorities’ reform strategy. Contributions from Somalia’s partners to the Somalia Country Fund are also critical to ensure smooth delivery of IMF technical assistance to support the authorities as they implement the reform agenda.
-0- PANA AR/MA 2Nov2023
