Somalia: IMF mission tips Somalia on development planning, institution building

Mogadishu, Somalia (PANA) - Striving to normalize relations with international financial institutions, it is essential for authorities in Somalia to continue with preparation of a coherent national development plan with a roadmap for institution building and strong programme for social safety nets, an International Monetary Fund (IMF) mission said in a statement released Tuesday.

In addition, the authorities need to develop domestic capacity and continue to rebuild economic and financial data, said IMF team leader Mohamad Elhage, affirming that the Fund "will continue to intensify its capacity development activities in Somalia using the multi-donor trust fund to help rebuild Somalia’s institutions and economic and financial infrastructure."

The statement followed the IMF team's visit to Nairobi, Kenya,  for discussions with the Somali authorities from 14-21 November on the 2016 Article IV Consultation and the first review of the Staff-Monitored Program (SMP).

At the request of the Federal Government of Somalia (FGS), the IMF’s Managing Director approved a 12-month SMP on 27 May 2016.

"We are encouraged by the pace of reforms to restore key economic and financial institutions since the approval of the SMP. We also welcome the authorities’ commitment to keep the programme on track," Elhage remarked.

He said their discussions covered recent economic developments for Somalia including: the near-and medium-term outlook, economic risks; reforms at the Central Bank of Somalia (CBS); and policies to sustain growth and revive the financial sector.

“We believe that to achieve the objectives of their economic and financial policies, it is essential for the authorities to continue to strengthen fiscal discipline, while ensuring that the fiscal framework underscores the need for a realistic tax revenue projection and confirm external grants in order to avoid new arrears," the IMF official noted.

In addition, Elhage  emphasized that the authorities adhere to their agenda for currency reform, reinforce the central bank governance structure, and improve its safeguard procedures.

"Effective implementation of the anti-money laundering (AML) law and guidelines is needed to sustain the inflows of remittances to Somalia, which are vital for supporting economic growth," he pointed out.

According to the IMF, Somalia's real GDP growth for 2016  is projected at 3.7 percent, driven by the telecommunication, construction and service sectors.

Also, the consumer price inflation is projected to remain low at about 1.0-1.5 percent, reflecting mainly weak commodity prices.

For 2017, growth is projected to decelerate to about 2.5, while inflation is expected to remain subdued at 1-2 percent. Growth is expected to recover to about 3.5–4.5 percent in 2018–19.

Elhage explained that the slower growth rate in 2017 reflects mainly the impact of the weak rainy season on the agriculture sector; while construction, telecommunications, and service sectors are projected to continue to register strong growth.

He said the external current account deficit is projected to remain large, but remittances and grants were expected to cover the deficit. The Somali Shilling/U.S. dollar exchange rate has remained stable within the range of about 22,200 and 23,000 since February 2015.

“The authorities have met all the structural benchmarks and six out of seven quantitative performance targets for the first review of the SMP," Elhage observed. "Although domestic government arrears were accumulated due to a shortfall in revenues and delayed in donors’ grants disbursement through end of September, the authorities were able to settle these new arrears following a recent disbursement of donors’ grants."

During the visit, the IMF team met with Finance Minister Mohamed Adan Ibrahim, Minister of Planning and International Cooperation Abdirahman Yusuf Hussein Aynte, Central Bank Governor Bashir Issa Ali, Director General at the Office of the President Ali Omar, and other officials.
-0- PANA AR 22Nov2016

22 november 2016 19:58:30

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