Somali authorities and IMF staff reach a staff-level agreement on the completion of the first review of the fourth Staff-Monitored Program (SMP IV);authorities' continued strong commitment to economic and financial reform is supporting satisfactory performance under SMP IV.
An International Monetary Fund (IMF) staff team led by Allison Holland visited Addis Ababa, Ethiopia, from September 10 to 13 to meet with the Somali authorities and undertake the first review under the fourth successive Staff Monitored Program (SMP) (covering May 2019 - July 2020). Reforms in this fourth SMP (SMP IV) focus on further efforts to mobilize revenues, including across the Federal Member States, strengthen public financial management, enhance financial sector stability, and strengthen compliance with the framework for anti-money laundering/ combatting the financing of terrorism.
At the end of the visit, Ms. Holland issued the following statement:
Following productive discussions, the IMF team and the Somali authorities reached a staff-level agreement on the completion of the first review under the SMP. The agreement is subject to approval by IMF's management.
Economic growth is projected to remain broadly stable at 2.9 percent in 2019. Inflation is projected to increase temporarily to 4.0 percent in 2019 due to higher food prices as a result of poor rainfall earlier in the year. Key risks to the outlook continue to reflect the difficult security situation and vulnerability to climate shocks.
IMF staff welcomes the authorities' ongoing commitment to reform under SMPIV. All the structural benchmarks for the first review�that is the reform measures critical for achieving the goals of SMP IV�have been met, and, although risks remain, progress is being made towards meeting those set for the second review.
The fiscal policy framework continues to strengthen, with domestic revenue mobilization in the year to July 2019 exceeding the target set in the program. The authorities plan to revise up their projection for domestic revenue for 2019 in the forthcoming supplementary budget to reflect this strong performance. To ensure critical expenditures can be met even in the event of unexpected revenue shortfalls, the government has decided to set aside some specific savings. IMF staff also welcomes the new mobile money regulations, which represents a further important step in protecting financial stability.
We are pleased by the stated commitment of the Finance Ministers of all the Federal Member States (FMS), together with the Federal Government (FGS), to securing debt relief under the HIPC Initiative, despite broader political differences. The IMF team encourages the FGS and FMS to sustain this cooperation to mitigate key risks to the program.
The authorities will need to maintain their commitment to the reforms outlined under
SMP IV to establish the track record on policies required to reach the Decision Point (DP) under the Heavily Indebted Poor Countries (HIPC) Initiative. The authorities' work on their 9th National Development Plan, which they intend to meet the HIPC requirement for a Poverty Reduction Strategy, is close to completion.
To fulfill the authorities' goal of reaching the HIPC DP as soon as possible, strong support from the international community will be critical to secure the financing needed to clear Somalia's arrears to the international financial institutions (IFIs) and debt relief.
During the visit, the team met with the Finance Minister, Mr. Abdirahman Duale Beileh; Minister of Planning, Investment and Economic Development, Mr. Gamal Hassan; Central Bank Governor, Mr. Abdirahman Mohamed Abdullahi; and other officials. The team also met and briefed parliamentarians, donors and other stakeholders on Somalia's performance under the SMP.
The team also invited, in cooperation with World Bank and European Union partners, Finance Ministers of the Federal Member States to a workshop on September 14 on Somalia's economic challenges and prospects, including for debt relief under the HIPC Initiative.rdquo;
Source: International Monetary Fund (IMF).