Saturday May 27, 2023
A man carries a sack through floodwater in Beledweyne, central Somalia, on May 14, 2023. PHOTO | HASSAN ALI ELMI | AFP
Somalia is all but assured of $9.4 million from the International Monetary Fund (IMF) after the latest review by the latter’s executive board.
When released, the funds will push the total of disbursement to Somalia to $386.1 million over seven years.
Over the past five years, Somalia has gone through IMF Staff Monitoring Performance reviews with the latest falling under the Extended Credit Facility and the Extended Fund Facility.
At the end of the review, the board approved a fourth HIPC interim assistance of SDR 2.211 million to cover 100 percent of Somalia’s eligible debt service to the IMF that falls due between June 17, 2023 and June 16, 2024.
In March, an IMF team led by Laura Jaramillo, held discussions with Somali authorities in Nairobi and agreed on the fifth review under the ECF arrangement.
“Notwithstanding significant climate, security, and political challenges, the Somalia authorities remain committed to economic reforms and the Highly Indebted Poor Countries (HIPC) process with the aim of building resilience, promoting inclusive growth, and reducing poverty,” the IMF said.It added that the HIPC Completion Point, a stage granting full debt relief, appears achievable by the last quarter of 2023.
“Improvements are ongoing on public financial management, including on payroll integration. It will be important to continue to implement reforms to improve Anti-Money Laundering/Combating the Financing of Terrorism and strengthen governance and transparency, including on procurement and concessions,” the IMF added.
To clear a debt of $5 billion, Ms Jaramillo suggested that authorities stay the course on the HIPC Completion Point.
“Impressive achievements include the recent approval by parliament of several key pieces of legislations, including the Electricity Act, the Extractive Industries Income Tax Law, the Data Protection Law, the Targeted Financial Sanctions Law, the Digital ID System Law, the Investment and Investor Protection Act, and the Federal Law on Fisheries,” Jaramillo stated.
“The authorities reached debt relief agreements with most Paris Club members and the Kuwait Fund for Arab Economic Development and continue to seek agreements with other bilateral creditors.”
IMF officials also touched on Somalia achieving debt relief.
“Contributions from Somalia’s partners to the Somalia Country Fund are critical to ensure smooth delivery of IMF technical assistance to support the goals of the ECF-supported programme and the HIPC Initiative.”
On March 25, 2020, IMF said Somalia had reached the HIPC Decision Point and now it indicates the country is posed to achieve a Completion Point leading to debt relief by end of 2023.
Somalia Debt Relief: A Longer-Term Proposition was a comparative article authoritatively published by John Hurley on the website of Center for Global Development (CGD) in May 2017.
Hurley partly wrote, “While Somalia’s challenges are much more difficult, the debt relief process in Liberia successfully established the building blocks for sound economic policy and basic institution building.”
In the case of Somalia, he cautioned that there could be bumps, if not boulders, in the road ahead.
On March 25, 2020, the Executive Board of the IMF approved that Somalia had reached the HIPC Decision Point and now the same board indicates that the Horn of Africa country is posed to achieve a Completion Point leading to debt relief by end of 2023.
The executive board of the International Monetary Fund last week completed a review that is expected to unlock $9.4 million for Somalia.
Over the past five years, Somalia has gone through IMF Staff Monitoring Performance reviews and this latest disbursement brings Mogadishu’s total disbursement under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) to $386.1 million) over seven years.
In completing the review, IMF approved a waiver of non-observance for the December 2022 performance criterion on spending on compensation of employees, goods and services and contingency based on corrective measures in the supplementary budget for 2023.
The board also approved a fourth HIPC [Heavily Indebted Poor Countries] interim assistance in the amount of SDR 2.211 million to cover 100 percent of Somalia’s eligible debt service to the IMF that falls due between June 17, 2023 and June 16, 2024, or the HIPC Completion Point, whichever is earlier.
Progress made
In March, an IMF team led by Laura Jaramillo, held discussions with Somali authorities in Nairobi and reached a staff-level agreement on the fifth review under the ECF arrangement.
IMF underlined significant progress being made by the Somali government despite multiple challenges.
“Notwithstanding significant climate, security, and political challenges, the Somalia authorities remain committed to economic reforms and the Highly Indebted Poor Countries process with the aim of building resilience, promoting inclusive growth and reducing poverty,” IMF said.
It added that programme performance has been broadly satisfactory and the HIPC Completion Point, a stage granting full debt relief, appears achievable by the last quarter of 2023.
It commended ongoing reforms in public financial management, including on payroll integration, in anti-money laundering/combating the financing of terrorism and in strengthening governance and transparency in procurement and concessions.
“Continued strengthening of Central Bank of Somalia institutional capacity and financial sector reforms are welcome and should continue,” the fund said.
Key milestones
Jaramillo also noted the recent approval by Parliament of several key pieces of legislations, including the Electricity Act, the Extractive Industries Income Tax Law, the Data Protection Law, the Targeted Financial Sanctions Law, the Digital ID System Law, the Investment and Investor Protection Act, and the Federal Law on Fisheries. IMF officials also noted the important milestone of a debit relief agreements with most Paris Club members and the Kuwait Fund for Arab Economic Development.
“Contributions from Somalia’s partners to the Somalia Country Fund are critical to ensure smooth delivery of IMF technical assistance to support the goals of the ECF-supported program and the HIPC Initiative.”
Somalia Debt Relief: A Longer-Term Proposition was a comparative article authoritatively published by John Hurley in the website of Center for Global Development (CGD) in May 2017.
Hurley partly wrote, “While Somalia’s challenges are much more difficult, the debt relief process in Liberia successfully established the building blocks for sound economic policy and basic institution building.”
In the case of Somalia, he cautioned that there could be bumps, if not boulders, in the road ahead.