Oh my goodness, have you heard?! The International Monetary Fund has miraculously granted a whopping $9.4 million to Somalia! What a whirlwind of emotions this news has brought upon us, I can hardly contain my excitement!
Can you fathom the latest news? The International Monetary Fund [IMF] has recently carried out the fifth review of the Extended Credit Facility [ECF] arrangement for Somalia. IMF has approved a whopping $9.4 million for Somalia as a result of their remarkable reforms momentum. This impressive disbursement brings Somalia’s total under the Extended Credit Facility [ECF] and the Extended Fund Facility [EFF] to SDR 285.4 million [about US$ 386.1 million]. The Executive Board has even approved a waiver of non-observance for the December 2022 performance criterion on spending on compensation of employees, goods, and services. However, this was based on corrective measures, found in the supplementary budget for 2023. To top it off, the board has also approved the fourth HIPC interim assistance of SDR 2.211 million. It will be used 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, it can be used for the HIPC Completion Point, whichever is earlier.
The ECF arrangement is in place to support the authorities’ National Development Plan in Somalia and reform the Heavily Indebted Poor Countries [HIPC] Decision and Completion Points. Program performance was mostly satisfactory per the Board, and the HIPC Completion Point appears achievable by 2023Q4. Economic activity in Somalia has slowed down due to the drought and reduced remittances inflows. Consequently, the GDP growth projection for 2023 has been downgraded by ¼ percent to 2.8 percent. In IMF’s statement, average inflation is expected to decrease to 4.2 percent in 2023, while commodity prices fall. Nonetheless, there are some risks. Near-term risks include worsening the food crisis if healthy rains don’t continue in 2023, increasing commodity prices, and security, political, and policy challenges that could hinder reaching the HIPC Completion Point.
The authorities have ensured the promotion of fiscal and institutional reforms and normalization of relationships with external creditors without fail. To enhance domestic revenue mobilization, they need to continue implementing reforms to improve AML/CFT and governance and transparency, including procurement and concessions.
Development partners’ immediate financing and capacity development support are crucial to the successful implementation of the reform strategy of the authorities. For IMF’s technical assistance to support the aims of the ECF-supported program and the HIPC Initiative, partners are urged to make contributions to the Somalia Country Fund.