- Somalia has continued steadfast reform implementation and program performance has been strong. A staff-level agreement was reached on the 3rd review of Somalia's Extended Credit Facility (ECF) arrangement.
- Real GDP growth is estimated to reach 4 percent in 2024, supported by robust exports and remittances. The economic outlook in 2025, however, is clouded by foreign aid disruptions and irregular rainfalls, with growth expected to slow to 3 percent. Future aid inflows to Somalia remain highly uncertain, but persistent aid decline would have a profound social-economic impact on Somali citizens.
- Continued support from international partners is crucial to support Somalia's economic development and the authorities' policy efforts.
Washington, DC: An International Monetary Fund (IMF) team, led by Ran Bi, conducted discussions with the Somali authorities in Nairobi during May 6-15, 2025 and reached a staff-level agreement on the third review under the Extended Credit Facility (ECF) arrangement. This agreement is subject to approval of the IMF's Executive Board.
At the conclusion of the discussions, Ms. Bi issued the following statement:
"I am very pleased to announce that the Somali authorities and the IMF team have reached a staff-level agreement on policies to complete the third review under the ECF arrangement approved in December 2023 for total access of SDR 75 million (about US$100 million) ( Press Release No. 23/463 ). The agreement is subject to approval by the IMF's Executive Board. Board approval would enable access to SDR 7.5 million (about US$10 million), bringing total disbursements under the arrangement to about US$70 million.
Real GDP growth is estimated at 4 percent in 2024, driven by continued recovery in agriculture. Inflation eased to 5.6 percent at end-2024, aided by softer global commodity prices. The 2025 outlook, however, is clouded by foreign aid cuts, irregular rainfalls and high uncertainty. Real GDP growth in 2025 is expected to slow to 3 percent amid weaker private consumption and imports. Inflation is projected to decelerate to 4.9 percent by end-2025, though the pace is slower than previously anticipated. Downside risks dominate the near-term outlook. In particular, a more severe and persistent decline in foreign aid would have lasting economic implications, exacerbate food insecurity and poverty, deteriorate human development indicators, and undermine Somalia's progress in rebuilding institutional capacity. The security situation also remains challenging amid the transition to the new African Union Support and Stabilization Mission in Somalia (AUSSOM).
In this difficult economic context, the authorities are committed to maintaining fiscal discipline, while accommodating priority needs. A small overall fiscal surplus was achieved in 2024, with strong domestic revenue outturns supported by the implementation of higher customs duties, sales tax automation, and enhanced tax administration. The 2025 Budget envisages a modest overall fiscal deficit of 0.2 percent of GDP. Despite continued strong revenue efforts, spending discipline and some expenditure reorientation will be needed to accommodate additional security spending within the overall 2025 spending envelope.
Fiscal reforms continue to progress steadily, and the authorities recognize the importance of accelerating efforts to build stronger public finances. On domestic revenue mobilization, key reforms include the ongoing customs modernization, a new income tax law, and improved enforcement of sales and income tax collection. Progress has continued in strengthening public financial management, investment management and debt management capacity. A roadmap to implement the Pay and Grade policy is ready, and a comprehensive legal framework for the extractive industries has been put in place to enhance governance and manage fiscal risks.
The Central Bank of Somalia (CBS) has strengthened institutional capacity and regulatory framework to promote financial stability. Efforts continue to enhance the AML/CFT framework and improve governance. The CBS has also spearheaded the preparation for the currency exchange and the currency board arrangement.
Continued external assistance from multilateral and bilateral partners remains crucial to support the authorities' policy efforts, especially in light of the high uncertainty and significant downside risks.
The mission would like to thank our counterparts for a constructive and fruitful dialogue. Meetings were held with the Minister of Finance H.E. Bihi Iman Egeh, the Central Bank Governor H.E. Abdirahman Mohamed Abdullahi, other government officials, development partners and private sector representatives."
