- The IMF Executive Board completed the third review under the Extended Credit Facility (ECF) arrangement for Somalia, allowing for an immediate disbursement of about US$10 million to support the country's economic reform agenda.
- Somalia's economic outlook is clouded by foreign aid disruptions, weather shocks and high uncertainty, with 2025 growth expected to slow to 3 percent from an estimated 4 percent in 2024.
- Program performance has been strong, and the authorities are committed to step up reform efforts amid the global headwinds. Policy priorities include accelerating domestic revenue mobilization, strengthening public financial management, promoting financial deepening and inclusion, improving governance, and enhancing statistics. Continued donor support is crucial to support the authorities' policy efforts.
Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the third review of Somalia's economic reform program supported by the Extended Credit Facility (ECF) arrangement. The Board's decision enables the immediate disbursement of SDR 7.5 million (about US$ 10 million), which will be channeled for budget support, bringing Somalia's total disbursement under the ECF to SDR 52.5 million (about US$ 70 million).
Somalia's ECF arrangement was originally approved by the Executive Board on December 19, 2023 (see Press Release No. 23/463 ). The program supports the authorities' post-HIPC reform strategy to further strengthen key economic institutions and promote macroeconomic stability and growth, in line with Somalia's National Transformation Plan and Centennial Vision 2060.
Following the Executive Board discussion, Mr. Nigel Clarke, Deputy Managing Director and Chair, made the following statement:
"The Somali authorities have maintained reform momentum with strong performance under their Fund-supported program despite significant global and domestic challenges. The newly launched National Transformation Plan provides a welcome medium-term reform agenda to build resilience, promote inclusive growth, and reduce poverty. Nevertheless, foreign aid cuts and the associated high uncertainty could weigh on Somalia's economic and social outlook. This highlights the urgency of strengthening domestic revenue mobilization to create room for social and development spending. Moreover, continued assistance from development partners remains critical for the successful implementation of the reform strategy.
"The authorities' strong revenue performance and steadfast implementation of revenue-enhancing reforms are welcome and should be intensified. Key reforms include continuing customs modernization, implementing the new Income Tax Law, and further enhancing revenue administration. Strengthening public financial and debt management is also important. In particular, the implementation of the Pay and Grade reform and the new pension regime for civil servants should be carefully managed to ensure fiscal sustainability.
"Progress to improve the central bank's institutional framework and build its capacity is commendable. Continued efforts are recommended to promote financial deepening and inclusion as well as to further enhance the AML/CFT framework. The authorities are also encouraged to continue their work toward carefully reintroducing the Somali Shilling and adopting a currency board arrangement.
"The adoption of a comprehensive legal framework to enhance governance in the petroleum sector is an important milestone. Its effective implementation is key to ensuring accountability and transparency in this industry. Further reforms to improve governance and fight corruption are also recommended."
