The International Monetary Fund announces an economic agreement with Somalia
Laura Jaramio explained that the agreement came after a review of the extended credit facility for Somalia in Nairobi. She praised the authorities for sticking with economic reforms despite a prolonged drought, the impact of the Russian war in Ukraine and ongoing security concerns. Jaramio said the IMF board was expected to review the agreement, which was reached at the expert level, in early December.
She added that if Somalia continues to make steady progress in reforms, it may reach the (completion point) in the global debt relief process under the Heavily Indebted Poor Countries Initiative by late 2023, which will allow Somalia to reduce its debt to about $550 million from $5.2 billion. .
“It would be a huge achievement,” Jaramio said, noting that it would reduce Somalia's debt to about seven percent of gross domestic product from around 90 percent now.
It will also open new sources of financing for Somalia, which is a great help at a time when the country is working to implement development programs and promote growth and employment. Improving domestic revenues will be a pillar of the country's economic reforms, including boosting sales tax collection.
The International Monetary Fund said that Somalia still needs continuous and immediate support from international partners given the current severe food crisis, but it also needs to work to give it a long-term resilience to climate shocks.
The IMF said that the outlook for Somalia remains bleak, as GDP growth is expected to reach 1.9 percent for 2022, down from 2.9 percent in 2021, and inflation is expected to reach 9 percent from 4.6 percent in 2021.
He said that near-term risks have risen, including a worsening of the food crisis, in which 4.3 million people already face acute food insecurity, if rains do not resume at good rates in 2022 or if commodity prices rise further.
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