GOOBJOOG NEWS | NAIROBI: A team from the International Monetary Fund (IMF) held talks with Somali authorities in Nairobi, Kenya where they reached an agreement on the fifth review under the Extended Credit Facility (ECF).
Speaking after the conclusion of the meeting, IMF team leader Laura Jaramillo noted that Somalia has continued to face an acute food shortage due to persistent drought and that IMF’s response focuses on the worst affected areas and coordinating with other humanitarian agencies in delivering aid.
“Thanks to donor support, close to 7.3 million people are getting some form of assistance. Nonetheless, half of the population would face acute food insecurity by June 2023 if the April-June rainy season disappoints and financing of humanitarian support is not adequate,” she observed.
Somalia officials revealed that the government has made commendable strides despite challenges posed by insecurity and drought which have slowed down economic growth and saw the Gross Domestic Product (GDP) estimates for 2022 and projections for 2023 drop due to reduced remittance inflows.
A report shows that the average inflation reached 6.8 percent in 2022 due to high food and fuel prices and is expected to decline to 4.2 percent in 2023 as commodity prices reduce but the risks still remain high if adequate rains will not be received this year.
The Somali government officials also noted that plans are underway to further improve revenue collection and ensure priority spending which will cut down on the wastage of public resources.
The government is also scheduled to submit to Parliament a Supplementary Budget for 2023 that presents a balanced fiscal position based on realistic revenues.
The Supplementary Budget will accommodate expenditure that is supportive of growth, security, development, and hiring of teachers while all other unnecessary spending will be scaled down.
Key fiscal reforms are being implemented on domestic revenue mobilization, customs modernization, new income tax laws, and increasing revenue collection in large income areas including the telecoms sector.
Also, public financial management has been strengthened, and improvements are ongoing in integrating all employees in the payroll system, fiscal reporting, procurement, and management of non-financial assets among other key areas.
The Central Bank of Somalia (CBS) is advancing institutional governance and financial sector reforms and will continue to enhance the regulatory framework and strengthen its capacity in risk-based supervision, including through legislation and preparation of risk-based prudential regulations.
The recently enacted Targeted Financial Sanctions Law will go a long way in addressing money laundering/financing of terrorism risks.
Notable achievements include the recent approval by Parliament of several key pieces of legislation, 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.
At the conclusion of the meeting, IMF and Somali authorities reached debt relief agreements with the Paris Club and the Kuwait Fund for Arab Economic Development (KFAED), and talks with other bilateral creditors are still being pursued.