IMF Board praises Somalia’s commitment to reform programme

Mogadishu, Somalia (PANA) - Despite a severe drought and sporadic terrorist attacks, Somalia avoided a significant economic slowdown in 2017 with support from the national and international community, according to the International Monetary Fund (IMF).

In 2017, Somalia faced a severe drought and sporadic terrorist attacks. These developments hurt economic activity, particularly in the north of the country and in rural areas, and temporarily impacted the tax collection efforts of the Federal Government of Somalia.

“However, the authorities (in Somalia) have navigated through these challenges and, with sustained national and international community support, the country avoided a severe humanitarian crisis and a significant economic slowdown,” the IMF Executive Board said in a statement it released on Saturday after concluding the Article IV consultation with Somalia.  

The Board noted the authorities’ strong commitment to the IMF staff-monitored programme (SMP) as they implemented difficult reform measures.

On 21 June 2017, IMF management approved a second 12 month SMP covering the period May 2017–April 2018, following Somalia’s successful completion of its first SMP. The programme is designed to help economic reconstruction efforts and assist the country in establishing a track record of policy and reform implementation.

In addition, the IMF is helping Somalia reach debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative as soon as feasible within established HIPC procedures. The HIPC process is designed to help countries avoid slipping back into arrears while putting them on a path to sustainable debt and reducing poverty.

Economic activity in 2017 slowed and the drought that hit the country since late 2016 has receded, but it took a considerable toll, particularly in the remote areas.

GDP growth is projected to have remained subdued at 1.8 percent in 2017 (down from 2.2 percent in 2016). Driven by higher food prices, year-on-year inflation increased to 5.2 percent (compared to a 4 percent annual average) at the end of December 2017.

“Directors welcomed the significant improvement in budget execution and fiscal performance in 2017 as well as the authorities’ drive to implement several important tax reforms that contributed to improving the fiscal outturn,” said the statement. “They were encouraged by the continued progress on public financial management (PFM) reforms and stressed that building on the reform momentum will be essential to strengthen the fiscal framework.”

Meanwhile, a small budget surplus of US$3.8 million was achieved by the end of September 2017, even though domestic revenue fell short of the programme target. The surplus was due in part to a slower-than-expected pace of budget execution.

For the period ended in December, preliminary information indicates that implementation of critical tax measures, and higher-than-programmed bilateral grants, have helped generate a budget surplus of about US$1.8 million. Domestic revenue is also estimated to have met the programme target.

IMF Directors supported the role of the Fund and the international community in helping Somalia reach debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative as soon as feasible within established HIPC procedures.

The HIPC process is designed to help countries avoid slipping back into arrears while putting them on a path of maintaining sustainable debt dynamics and reducing poverty.

Even before it reaches the HIPC Decision Point, the Directors were pleased that Somalia is receiving substantial grants from the international community.

“In addition to securing broad based donor support, the establishment of a satisfactory track record of cooperation with the Fund on policies and payments under this and subsequent SMPs would be a critical step in the process of arrears clearance and normalization of relations with the international community which would pave the way to an eventual IMF supported programme and HIPC debt relief,” the Directors said.
-0- PANA AR 24Feb2018

24 february 2018 10:17:36




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