Monday, July 22, 2024

Somalia reaps $100m windfall after IMF policy review

Friday November 3, 2023

Somalia has been granted relief and an additional $100 million financing under a three-year Extended Credit Facility (ECF) arrangement from the International Monetary Fund (IMF) after Mogadishu committed to further economic reforms.

The financing, which is still subject to the fund’s executive board approval, follows the considerable progress that Somalia has made in rebuilding its economy and institutions under the current ECF-supported programme since 2020.

“Somalia has maintained strong implementation of wide-ranging reforms to help strengthen key economic and financial policy institutions,” IMF team leader, Ms Laura Jaramillo said in a statement last week.

“This progress is paving the way for Somalia to reach the Heavily Indebted Poor Countries (HIPC) Completion Point in December 2023 at which point Somalia is expected to receive debt relief and move towards fully normalizing relations with its key creditors.”

IMF’s assessment of Somalia comes after a month-long (October) tour of several African states including the Democratic Republic of Congo (DRC), Rwanda, Senegal, Mozambique, Gambia, Comoro and Zimbabwe, where the team held discussions with authorities on key economic, financial, social and governances reform programmes critical in unlocking millions of dollars towards budgetary support and strengthening of international reserves.
The IMF team that conducted discussions with Somali authorities in Nairobi (Kenya) during September 11- 22 and October 22-24 however noted that despite the progress achieved Somalia still faces significant challenges ahead including those stemming from economic, social, security, and climate risks.

Last year (2022) an estimated 54 percent of the population was living on less than $2.06 per day.

Growth is currently insufficient to reduce widespread poverty, address large social needs and create sufficient jobs for the youth.

Somalia is highly vulnerable to climate shocks that hurt growth and hinder poverty reduction efforts.

As a result, Somalia authorities have requested a new 3-year IMF-supported programme under the ECF to help the country further strengthen key economic institutions and promote macroeconomic stability and growth.

According to IMF Somalia’s post-HIPC policy priorities will be to maintain fiscal sustainability, increase domestic revenues and strengthen public financial management, promote financial deepening and financial inclusion, improve business environment and governance and enhance statistics.

In DRC, the IMF staff and the Congolese authorities reached a staff level agreement on economic policies to complete the fifth review of the three-year ECF supported programme which is expected to make available SDR152.3 million ((about $200.39 million) by mid- December to build up international reserves.

An IMF team led by Calixte Ahokpossi held meetings with the Congolese authorities from October 18 to 31 to discuss progress on reforms and the authorities’ policies in the context of the fifth review of the DRC’s three-year arrangement under the ECF which was approved on July 15, 2021, for a total disbursement of SDR 1.06 billion (about $1.52 billion)

In Rwanda, the IMF team reached a staff level agreement with the Rwandan authorities on policies needed to complete the second reviews of Rwanda’s Policy Coordination instrument and programme under the Resilience and Sustainability Facility.

An agreement was also reached on a new 14-month Stand-by-Credit Facility with total access of 125 percent of quota (SDR 200.25 million) or about $262 million to help mitigate the balance of payment pressures arising from the climate-related shocks.

An IMF team led by Reuben Atoyan visited Kigali during October 17-31 to discuss the authorities’ policy priorities and progress on reforms within the context of the second reviews of Rwanda’s PCI and RSF.

In Mozambique, the IMF staff discussed with the Mozambican authorities about performance and policies underpinning the third review of the program under the ECF arrangement. Discussions were fruitful and will continue in the coming weeks aiming to reach Staff Level Agreement.

An IMF team, led by Mr Pablo Lopez Murphy, conducted discussions with the Mozambican authorities during October 18 to October 31, 2023, on the Third Review under the Extended Credit Facility (ECF) arrangement.

In Gambia, the IMF Staff and the Gambian Authorities reached a staff-level agreement on economic policies and reforms to be supported by a new 3-year arrangement under the Extended Credit Facility (ECF) with requested access of SDR74.64 million (around $100 million)

The ECF-supported programme aims to strengthen economic recovery, tackle inflation, address debt vulnerabilities, advance structural reforms and foster strong and inclusive growth.

The IMF team led by Mr Ivohasina Fizara Razafimahefa, Mission Chief for The Gambia visited Banjul, The Gambia during October 19-November 1, 2023, to discuss with The Gambian authorities economic and financial policies under a new 36-month ECF arrangement.

The staff-level agreement which is subject to approval by the IMF Management and Executive Board which will make available about $10.9 million.

In Comoros, the IMF staff also reached an agreement with the Comorian authorities on economic policies and reforms under the 4-year ECF-supported programme.

The review once formally completed by the IMF Executive Board would release about $4.7 million in financing, bringing total disbursement under the arrangement to $9.5 million.

An IMF team led by Ms Suchanan Tambunlertchai visited Moroni during October 18-31 to discuss economic and financial policies in the context of the first review of the programme supported by the ECF arrangement.

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