Tal og statistik

IMF Executive Board Concludes 2019 Article IV Consultation with Somalia

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Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2019 Article IV Consultation with Somalia







August 1, 2019















On July 22, 2019, the Executive Board of the International Monetary Fund
(IMF) concluded the 2019 Article IV consultation


[1]

with

Somalia.


Improved confidence, on the back of the continued implementation of
reforms, and strong donor support continue to support economic activity,
especially in the telecom, trade, construction, and financial sectors.
However, poor rainfall in Spring weighs on the outlook and threatens food
security. GDP growth is estimated at 2.8 percent in 2018 after 1.4 percent
in 2017. If normal rains resume later this year, GDP growth could remain
broadly unchanged at around 2.9 percent in 2019. Inflation is expected at
3.0 percent in 2019, following 3.2 percent in 2018.

The Federal Government of Somalia’s (FGS) continued efforts to broaden the
tax base and strengthen tax administration has been reflected in increased
domestic revenue (almost 30 percent higher than in 2017). This has
supported a small expansion in spending on health and education. However,
expenditures continue to be dominated by spending on salaries and other
operating costs, especially on security-related expenditures, with little
space for critical social and development programs.

Despite stronger growth and the improving fiscal position, per capita
incomes remain very low and more resources are needed to achieve greater
economic resilience and reduce poverty. With debt at unsustainable levels
(at about $4.7 billion or 100 percent of GDP in 2018, of which 96 percent
is in arrears), Somalia will need the continued support of the
international community to help meet much-needed humanitarian and
development needs.

Somalia’s fourth SMP (May 2019July 2020) will support the
authorities’ continued reform efforts, laying the foundation for greater
self-sufficiency and higher and more inclusive growth. The program will
expand and deepen measures to build fiscal sustainability, across the FGS
and the Federal Member States, further improve financial stability, address
residual anti-money laundering and combating the financing of terrorism
(AML/CFT) gaps, and strengthen governance and the fight against corruption.

Executive Board Assessment

[2]

Executive Directors agreed with the thrust of the staff appraisal. They
commended the authorities’ strong commitment to implementing three
consecutive staff‑monitored programs (SMP) in a challenging environment,
noting that Somalia’s gradual economic recovery reflected the authorities’
sustained policy and reform efforts, coupled with strong donor support.
Directors recognized the challenging security and political situation, and
welcomed the authorities’ ongoing efforts to improve economic resilience
and inclusive growth. Directors indicated that the forthcoming National
Development Plan should provide a blueprint to support these goals, and
encouraged consultation with a wide set of stakeholders.

Directors welcomed the continued improvement in fiscal performance. Efforts
to broaden the tax base and strengthen tax administration have increased
domestic revenues, supporting a small expansion in health and education
spending. However, substantially boosting development spending and
achieving fiscal self‑sufficiency will require more effort in terms of
revenue mobilization. Directors encouraged continued public financial
management (PFM) reforms, highlighting the need to strengthen commitment
controls and embed improvements in procurement. They welcomed the cabinet
approval of the airport‑fee contract and further progress on the
renegotiation of the Mogadishu port contract. Directors stressed that
implementing a strong fiscal framework, supported by effective natural
resource management and revenue‑sharing frameworks with the Federal Member
States, will be critical to realizing Somalia’s longer‑term potential.

Directors welcomed the authorities’ efforts to enhance financial sector
stability and strengthen supervision, and agreed that bringing mobile money
service providers under the regulatory umbrella is a key near‑term
priority. Directors were encouraged by the progress in strengthening the
anti‑money laundering and combating the financing of terrorism regime, and
stressed the need to address the remaining legal and operational gaps.

Directors encouraged continued progress on addressing governance weaknesses
and the risk of corruption. They emphasized that passage of key
legislation—including on revenue, PFM, audit, petroleum, statistics, and
anti‑corruption—would promote better governance and transparency. Directors
encouraged further efforts to strengthen statistical institutions and
address data gaps. They noted that intensive capacity development support
will need to be sustained to bolster ongoing reforms.

Directors concurred that Somalia’s external debt is unsustainable, and
supported the authorities’ continued efforts to make progress toward the
Heavily Indebted Poor Country (HIPC) initiative Decision Point. In this
context, Directors agreed that the macroeconomic and structural policies
outlined under the fourth SMP meet the policy standards associated with
upper credit tranche arrangements. Directors also welcomed the authorities’
intention to begin making token payments to the IMF in 2020, and stressed
that these should be very small given Somalia’s limited resources and
challenging circumstances. Directors considered that satisfactory
implementation of the SMP will help establish a track record and pave the
way toward arrears clearance and eventual debt relief under the HIPC
initiative. They recognized that this will also require the concerted
effort of the membership to mobilize the necessary financing for debt
relief, including to meet the costs for the Fund. To this end, they looked
forward to discussing possible financing options in the period ahead.


Somalia: Selected Economic and Financial
Indicators, 2015–22

(IMF quota = SDR 44.2 million;
Population: 14.2 million, 2018
estimate)

(Poverty incidence: 69 percent; Main
Export: Livestock)

Est.

Proj.

2015

2016

2017

2018

2019

2020

2021

2022


National income and prices

Nominal GDP in millions of U.S. dollars
1/

4,049

4,198

4,509

4,721

4,958

5,218

5,507

5,816

Real GDP, annual percentage change

3.5

2.9

1.4

2.8

2.9

3.2

3.5

3.5

Per capita GDP in U.S. dollars

310

313

327

332

339

347

357

368

Consumer prices (e.o.p., percent
change)

0.3

1.2

6.1

3.2

3.0

2.7

2.3

2.2

(Percent of GDP)


Central government finances 2/

Revenue and grants

3.5

4.1

6.0

5.7

6.9

7.2

7.4

7.7

of which:

Grants

0.7

1.4

2.8

1.8

3.0

2.9

2.9

2.8

Expenditure, of which:

3.3

4.1

6.6

5.7

6.9

7.0

7.2

7.5

Compensation of employees 3/

1.3

1.3

2.8

3.0

3.2

3.3

3.4

3.5

Purchase of non-financial assets

0.1

0.2

0.1

0.2

0.5

0.4

0.4

0.3

Overall fiscal balance

0.0

0.0

-0.6

0.0

0.1

0.2

0.2

0.2

Drawdown of government deposits

0.0

0.0

0.7

0.1

0.0

0.0

0.0

0.0

Overall balance, net

0.1

0.0

0.1

0.2

0.1

0.2

0.2

0.2

Stock of domestic arrears

1.7

1.8

1.5

1.5

1.3

1.1

0.8

0.6

(Millions of U.S. Dollars)


Central bank summary balances

Foreign assets (gross)

68.6

60.9

89.2

118.9

Gross reserves of the central bank

42.6

41.8

48.1

51.1

Net foreign assets, excl. IMF 4/

21.6

21.6

24.0

26.2

CBS liabilities to government

7.2

5.4

29.3

39.5

(Percent of GDP)

Balance of payments

Current account balance

-6.0

-9.4

-9.0

-8.3

-8.3

-8.0

-8.0

-8.9

Trade balance

-72.8

-74.5

-80.5

-73.7

-72.6

-71.1

-71.4

-70.6

Exports of goods and services

25.6

25.4

22.1

25.9

26.8

26.5

26.2

27.0

Imports of goods and services

98.5

99.9

102.6

99.6

99.4

97.6

97.6

97.6

Remittances

32.9

32.5

31.5

29.2

28.8

29.1

29.3

28.8

Grants

34.9

33.3

40.8

36.9

36.3

34.7

34.7

33.7

Foreign Direct Investment

7.4

7.9

8.2

8.6

9.0

8.9

9.0

9.0

External debt

108.2

105.3

103.3

99.5

99.5

99.5

99.4

99.3

Market exchange rate
(SOS/USD, e.o.p.)

22,285

24,005

23,605

24,475

Sources: Somali authorities; and Fund
staff estimates and projections.

1/ There has been a significant
downward revision to GDP compared to

the last staff report that affects all
ratios to GDP.

2/ Budget data for the Federal
Government of Somalia. Fiscal
operations are recorded on a cash
basis. GDP data cover the entire
territory of Somalia.

3/ Increase in compensation of
employees in 2017 reflects the bringing
onto budget military spending related
to the loss of an

off-budget grant.

4/ Program definition per TMU ¶9.




[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
here:

http://www.imf.org/external/np/sec/misc/qualifiers.htm

.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Wafa Amr

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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