IMF Greenlights $10 Million Aid Package for Somalia, Predicts 3.7% Economic Growth by 2024

In a recent development, the International Monetary Fund (IMF) Executive Board completed a thorough review of Somalia’s Extended Credit Facility (ECF) arrangement. They have approved an immediate fund disbursement of approximately $10 million to assist the country’s economic policies and reforms. This decision comes after significant strides made by Somalia in its reform agenda, with a focus on bolstering economic growth and stability.

Somalia’s real GDP growth is forecasted to increase to 3.7% in 2024, up from 2.8% in 2023. The growth is attributed to a resurgence in agriculture, higher remittances, and increased investments. The IMF praised Somalia for its commendable program performance, with key policy areas centered on fiscal sustainability, revenue enhancement, public financial management, financial expansion, governance enhancement, and statistical improvements.

The recent review follows Somalia’s successful attainment of the Completion Point under the Heavily Indebted Poor Countries (HIPC) initiative in December 2023, resulting in substantial debt relief. The country’s external debt has been reduced from 64% of GDP in 2018 to under 6% by the close of 2023. This debt relief, totaling $4.5 billion, marks the culmination of a dedicated effort spanning nearly ten years and spanning three political administrations, showcasing Somalia’s dedication to economic reform.

Antoinette Sayeh, Deputy Managing Director and Acting Chair, lauded the consistent reform progress maintained by Somali authorities since achieving the HIPC Completion Point. She emphasized the importance of continued support from development partners for the successful implementation of the reform strategy. Sayeh highlighted the authorities’ strong revenue performance and the implementation of revenue-enhancing measures, emphasizing the necessity for sustained efforts in domestic revenue mobilization.

Furthermore, the IMF underscored the importance of Somali authorities’ robust revenue performance and the implementation of revenue-enhancing reforms. Efforts such as customs modernization and the introduction of a new income tax law are expected to create fiscal space for priority spending. Enhancing public financial management, particularly through payroll integration and expenditure controls, is deemed crucial by the IMF.

Sayeh also highlighted the commendable efforts to strengthen the institutional capacity of the central bank. She emphasized the need for a careful approach in formulating monetary and exchange rate policies, particularly in the context of the planned currency reform. Promoting financial deepening, improving financial inclusion, advancing reforms to enhance the AML/CFT framework, and governance were also emphasized.

Despite facing challenges such as security threats and climate volatility, Somalia remains dedicated to its reform agenda, supported by international partners. The $10 million disbursement under the ECF and the $4.5 billion debt relief package are testament to this support and commitment to growth.

Finance Minister Bihi Iman Egeh, speaking at the IMF-World Bank spring conference in April 2024, stressed the importance of ongoing reforms and partnerships for Somalia’s economic stability and growth. Somalia’s integration into the East African Community economic bloc is anticipated to drive further reforms and boost trade integration.