Somalia: IMF insists Somalia must improve fiscal discipline

Mogadishu, Somalia (PANA) –   An International Monetary Fund (IMF) team on Tuesday recommended four critical measures for the authorities in Somalia to improve fiscal discipline, raise domestic revenue, and avoid new domestic arrears in order to keep the Staff-Monitored Programme (SMP) for the country’s recovery on track.

For the government to improve budget execution, the team said it is important that any expenditure increase be fully covered by realistic revenue projections or confirmed grants; the authorities swiftly implement all revenue measures outlined in the budget and additional fiscal measures recently identified to keep the programme on track; and the Federal Government of Somalia should remain current on its payment obligations.

The IMF team issued a statement after visiting Nairobi, Kenya, to discuss with the Somali authorities recent developments, progress under the SMP, and the economic outlook for the Horn of Africa country. The SMP covers the period May 2017–April 2018.

“Somalia’s economic and social infrastructure are still significantly underdeveloped, institutions are weak, poverty remains widespread, and the drought has compounded the situation,” remarked the IMF team leader, Mohamad H. Elhage. “Consistent reform implementation under this SMP and subsequent ones will help strengthen institutions and economic policies, paving the way for eventual future debt relief.”

The team also recommended to the authorities to implement speedily revenue measures outlined in the budget, particularly the sales tax on telecommunications and hotels.

According to the statement, the IMF staff noted that since the first SMP, domestic arrears have been accumulated numerous times. “Stronger political commitment is required to avoid new domestic arrears accumulation. In this context, staff welcomes the authorities’ initiative to work with the IMF to implement an Arrears Management Plan,” it said.

On currency reform, IMF staff welcomed the progress made by the Central Bank of Somalia under the roadmap for currency reform. They also agreed with the authorities on a number of follow-up measures that need to be implemented to fully complete the remaining benchmarks for “credible currency reform.”

Mr. Elhage noted that the government’s fiscal position is weak, partly because of serious shortfalls in fiscal management, a poor tax collection system, and a heavy external debt burden, with no capacity to repay.

“The central bank and the financial sector are nascent, and widespread counterfeiting has diminished confidence in the national currency,” he said.

The IMF team has encouraged the Central Bank of Somalia to keep up the momentum of reform implementation in order to ensure credible currency reform.
-0- PANA AR 26Sept2017

26 september 2017 19:05:08

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