Somalia prepares to launch new national currency

Nairobi, Kenya (PANA) – Somalia has obtained backing of the International Monetary Fund (IMF) to launch a new national currency which will replace the Somali Shilling currently in circulation, it was confirmed here on Tuesday.

“The IMF supports the Somali authorities’ initiative to reach out to donors to mobilize the needed support and funding to launch a new national currency,” said a statement issued after the Somali authorities and the IMF reached a staff-level agreement on a new 12-month Staff-Monitored Programme (SMP).

The SMP will continue to support the authorities’ broad reform agenda, focusing, in particular, on enhancing public financial management and revenue mobilization; completing Phase I of the currency reform; and putting the foundation for financial sector reforms to foster financial development, inclusion, and stability.

An IMF team visited Nairobi, Kenya, from May 7—14, for discussions with Somali authorities on the review of the second SMP and to agree on SMP III.

A statement issued by the IMF on Tuesday said that financial sector reforms are also intended to  strengthen Somalia’s compliance with the anti-money laundering and combating the financing of terrorism (AML/CFT); and improving data reporting.

“The Somali authorities continue to demonstrate a strong commitment to implement critical reform measures in a very difficult environment,” said Mohamad Elhage who led the IMF staff team, noting that they welcomed the authorities’ continued satisfactory progress under the SMP.

“The Federal Government of Somalia is making progress in building institutions and improving economic performance. Budget execution, the treasury and cash management frameworks, and domestic revenue collection are improving,” said Elhage.

He observed that economic activity in Somalia is recovering from the effects of the drought in 2016-17. Sustained international community support and remittances helped the country avoid a severe humanitarian crisis.

For 2018, according to the IMF team, growth is projected to increase to 3.1 percent from an estimated 2.3 percent in 2017, and inflation is expected to ease to under 3 percent from around 5.2 percent in 2017.

At the same time, reflecting a strong resolve to implement important fiscal measures under the SMP, the fiscal framework and fiscal performance improved in 2017 and during the first quarter of 2018.

However, despite the important reforms implemented since the first SMP (May 2016-April 2017), significant challenges remain.

“Growth is too low to make a significant dent in Somalia’s widespread poverty, high youth unemployment, and large social needs. The economy is vulnerable to shocks and lacks buffers needed to develop resilience. The external public debt is high, and there is no capacity to service public debt obligations,” said Elhage.

“Without proper compliance with the AML/CFT international standards, Somalia will continue to suffer from pressures related to the reduction in correspondent banking relationships. This could result in lower and volatile remittances inflows, which are Somalia’s lifeline.”  

Strengthening the procurement framework and improving governance and transparency are important features of SMP III, which will be supported by technical assistance from the IMF.

“Somalia’s debt relief is a priority for the IMF, and every effort is being made to accelerate the process within the established framework under the HIPC Initiative, which is designed to help countries avoid slipping back into arrears while putting them on a path to sustainable debt and reducing poverty,” Elhage added.
-0- PANA AR 15May2018.

15 mai 2018 18:26:22

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