Drought, terrorist attacks take toll on Somalia’s economy - IMF

Mogadishu, Somalia (PANA) – Following the 2017 Article IV Consultation and the first review of the Staff Monitored Programme (SMP) with Somalia, the International Monetary Fund (IMF) has concluded that the 2017 drought and sporadic terrorist attacks took a toll on economic activity in the Horn of Africa country.

“The drought has hurt the economy and temporarily impacted the Federal Government of Somalia’s tax collection efforts. These developments offset a steady recovery in the service sector, including in the telecommunication and transportation sectors,” observed IMF staff team leader Mohamad Elhage in a statement issued on Wednesday.

According to the statement, the IMF team held discussions with the Somali authorities from 5-11 December in Nairobi, Kenya, covering recent economic developments in Somalia, including the fiscal framework; progress on currency reform; the financial sector; governance and anti-corruption efforts; and social safety net programmes.

“The authorities’ performance under the SMP through September 2017 was broadly satisfactory. They have updated their memorandum of economic and financial policies for the period 2018—19, nearly completed the currency reform roadmap, and drafted a roadmap for the development of the financial sector in the period ahead,” Mr. Elhage said.

The IMF has welcomed the Somali authorities’ strong commitment to policy and reform implementation under the SMP in a difficult environment. The Fund’s staff also supported the authorities’ corrective measures to prevent a shortfall in domestic revenue and improve domestic revenue mobilization.

On 21 June 2017, the IMF management approved a 12-month SMP covering the period May 2017—April 2018, following Somalia’s successful completion of its first SMP since the end of the civil war.

The programme is designed to help economic reconstruction efforts and to start establishing a track record of policy and reform implementation.

“We are encouraged by the authorities’ commitment and by the pace of reforms to restore key economic and financial institutions, and welcome their efforts to keep the programme on track,” Mr. Elhage noted.

According to the IMF staff, it will be important for Somalia to continue advancing the broad-based growth reform agenda outlined under the mutual accountability framework in collaboration with development partners. The National Development Plan should be updated with increased focus on governance, anti-corruption, and social safety net programmes.

Assuring the Fund’s readiness to intensify its capacity development activities in Somalia, Mr. Elhage suggested that the Federal Government of Somalia should redouble to develop capacity of public institutions and continue to rebuild economic and financial data.

“The authorities are encouraged to continue their numerous, tangible initiatives to combat corruption and improve governance,” he said.

On fiscal discipline, he advised that continued efforts to enhance public financial management and cash management will help improve budget execution and avoid accumulation of domestic arrears.

“As the preconditions for the currency reform are nearly completed,” Mr. Elhage added, “a careful preparation for the launch of the new Somali Shilling will be essential. Continued political support for combating counterfeiting will be critical for the success of the currency reform and a well-designed communications strategy should be developed for the launch of the new currency.”
-0- PANA AR/MA 13Dec2017

13 december 2017 10:59:38

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