Somalia's finance minister discusses financial reforms, post-debt relief at IMF-World Bank Spring Conference

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Tuesday April 16, 2024

Somalia's Finance Minister Bihi Iman Egeh and his delegation engage in crucial discussions with Dr. Mahmoud Mohieldin, the IMF's Senior Vice President, during the IMF-World Bank spring conference in Washington D.C. Their talks focus on advancing Somalia's financial reforms and strategies for sustainable economic growth. / CREDIT: Somalia Minister of Finance

MOGADISHU (HOL) — Somalia's Finance Minister Bihi Iman Cige is in Washington D.C. this week to discuss key financial reforms and strategies for post-debt relief with global leaders. The discussions are part of the spring conference hosted by the International Monetary Fund (IMF) and the World Bank.

The biannual event is a platform for discussing debt relief, financial processes, and the global economic outlook, attracting leaders and financial experts worldwide. Minister Cige's initial talks with Dr. Mahmoud Mohieldin, the IMF's Senior Vice President for the 2030 Development Agenda, United Nations Relations, and Partnerships, focused on enhancing Somalia's financial sector to foster economic growth and stability.

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These talks come on the heels of significant financial milestones for Somalia, including substantial debt forgiveness recognized under the Heavily Indebted Poor Countries (HIPC) Initiative. Last December, the IMF and World Bank's International Development Association approved Somalia's Completion Point under the enhanced HIPC Initiative, a move that dramatically reduced the nation's external public debt from $5.3 billion in 2018 to just $0.6 billion by the end of 2023.

Reaching the HIPC Completion Point was a watershed moment for Somalia, lowering its external debt from 64% of GDP in 2018 to less than 6% by the end of 2023. This paves the way for full normalization of relations with key international partners, as well as improved access to critical financial resources, all of which will help drive economic management, poverty reduction, and job creation.The Somali government is committed to maintaining reform momentum and increasing domestic revenue, which currently stands at $345 million per year, without incurring additional external debt.

Despite making significant strides in financial reforms, Somalia is still grappling with a host of challenges. These include security threats, climate volatility, and the pressing need for robust economic growth to tackle widespread poverty and significant social needs. The poverty rate is alarmingly high, with 54% of the population living on less than US$2 per day. The current growth rate is insufficient to alleviate poverty, meet significant social needs, and create enough job opportunities for the youth. Moreover, Somalia is highly vulnerable to climate shocks, which impede growth and complicate poverty reduction efforts. The country has also been embroiled in a conflict with the al-Qaeda-linked al-Shabaab group since 2006, a situation exacerbated by recurring climatic shocks like droughts and floods.

The ongoing financial and institutional support is complemented by political efforts to harmonize customs tariffs—a critical step toward economic integration. However, political challenges within the region have delayed the implementation of these reforms, particularly the harmonization of customs tariffs at the ports of Kismayo, Bossaso, and Mogadishu.

Somalia's recent entry into the East African Community economic bloc is expected to catalyze reforms, mainly through the harmonization of customs regimes, which is a strategic goal of the bloc. The move is significant as it opens up new trade opportunities for Somalia and aligns the country's economic policies with those of its regional partners.

Throughout the week-long conference, the Somali delegation will engage in discussions with leaders from various countries and representatives from financial institutions. The outcomes of these discussions are expected to include commitments to ongoing financial and institutional support, as well as potential partnerships for economic development initiatives. The focus will be on critical topics such as debt relief, financial processes, and the global economic outlook.

Somalia's Finance Minister Bihi Iman Egeh and his delegation engage in crucial discussions with Dr. Mahmoud Mohieldin, the IMF's Senior Vice President, during the IMF-World Bank spring conference in Washington D.C. Their talks focus on advancing Somalia's financial reforms and strategies for sustainable economic growth. / CREDIT: Somalia Minister of Finance

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