Via IMF (Den Internationale Valutafond)

IMF Staff Completes 2019 Article IV Consultation Discussions, Review Visit and Reaches Staff-Level Agreement on a Fourth Staff-Monitored Program with Somalia







May 13, 2019











  • The Somali authorities and the IMF reach a staff-level agreement on a fourth Staff-Monitored Program (SMP IV) covering the period May 2019—July 2020.
  • IMF staff commends the Somali authorities for sustained reform implementation and continued satisfactory performance under successive SMPs.
  • It is expected that the SMPIV will be endorsed by the Executive Board as meeting the conditionality standard of an upper credit tranche (UCT) arrangement, putting Somalia more clearly on the path to debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative.

An International Monetary Fund (IMF) team, led by Allison Holland, met with
the Somali authorities in Addis Ababa, Ethiopia, from April 24 to May 2, to
discuss recent economic developments, review progress on reforms under the
third Staff-Monitored Program (SMP III), and to agree a successor fourth
SMP to consolidate gains and extend reforms.

Ms. Holland issued the following statement:

“Thanks to the authorities’ strong commitment, program implementation
remains robust and capacity continues to strengthen, despite a challenging
environment.

“Somalia’s economy continues to recover, supported by vigorous activity in
the construction, telecommunications, and financial services sector in
2018. Economic growth is estimated at 2.8 percent, and end-year inflation
is estimated at 3.2 percent for 2018. Growth is projected to strengthen to
3.0 percent and inflation to ease further to 3.0 percent, in 2019. But the
outlook remains vulnerable to the still fragile security situation, climate
shocks and the still developing institutional capacity, and more is needed
to improve economic resilience, increase employment and reduce poverty.

“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, which reached $184 million in 2018 (almost 30 percent
higher than in 2017) and $54 million for the first quarter of 2019. The
overall cash fiscal position remains in surplus. Public financial
management continues strengthening, including with a sustained improvement
in cash forecasting and reduction in the use of cash advances.
Nevertheless, Somalia remains heavily dependent on grants and more efforts
will be needed to create space for critical social and development
spending, and put Somalia clearly on the path to fiscal self-sufficiency.

“The team is encouraged by the authorities’ further efforts to enhance
financial sector supervision, especially to bring mobile money service
providers within the oversight of the Central Bank of Somalia (CBS). Staff
also welcomes progress in strengthening the implementation of the
anti-money laundering and combatting the financing of terrorism (AML/CFT)
regime, including the commencement of large transaction reporting and
efforts to build capacity at the Financial Reporting Center. Staff urged
the authorities to address remaining gaps in AML/CFT regulation.

“We welcomed the authorities’ efforts to consult stakeholders throughout
the country and development partners in formulating a new National
Development Plan (NDP9). NDP9 is expected to set out the road map to
achieving higher and more inclusive growth and reducing poverty, and serve
as an interim-Poverty Reduction Strategy Paper (iPRSP). Staff urged further
consultation to narrow the plan’s priorities and recommended these
incorporate the key findings of the Drought Impact and Needs Assessment and
Recovery and Resilience Framework. The cost of the plan should be
estimated, and a financing strategy put in place.

“The team, together with the authorities, discussed the application of the
IMF’s new governance assessment framework to Somalia, which suggested
notable governance weaknesses and a significant perception of high risks of
corruption. Staff acknowledged the authorities’ efforts to reduce these
risks, including through reforms already achieved in strengthening public
financial management, enhancing fiscal transparency, and strengthening
financial sector oversight. Swift implementation of key bills currently
with Parliament—including on revenue, public financial management, audit,
petroleum, and statistics—would promote better governance and help
consolidate reform.

“Looking ahead, we encouraged the Somali authorities to sustain the reform
momentum that has carried them through the satisfactory completion of three
consecutive SMPs, and urged the completion of
NDP9 and continued efforts to secure the necessary financing assurances,
including to clear arrears to the international financial institutions.
These efforts will help secure debt relief under the HIPC Initiative in due
course.

“During the visit, the team met with Finance Minister Beileh, Minister of
Planning, Investment and Economic Development Hassan, Central Bank Governor
Abdullahi, Chairman of the Economic and Finance Committee of the House of
the People Siraji, and other senior officials. The team met development
partners and other stakeholders in Nairobi on May 3. The IMF team would
like to thank the Somali authorities for their cooperation and the open and
productive discussions.”


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Wafa Amr

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






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