On December 9, the International Monetary Fund (IMF) Executive Board completed its 2024 Article IV Consultation and second review under the Extended Credit Facility (ECF) for Somalia. This decision allows an immediate disbursement of SDR 7.5 million, approximately US$10 million, increasing Somalia’s total disbursement under the ECF to SDR 45 million, about US$60 million.
Initially approved by the IMF's Executive Board on December 19, 2023, Somalia's ECF arrangement supports economic reform strategies following its completion point under the Heavily Indebted Poor Countries Initiative. These efforts aim to bolster economic institutions and promote stability and growth in line with Somalia’s national development plan.
The country's real GDP growth outlook has improved, with expectations for continued positive trends in agriculture, exports, and remittances into 2025. Real GDP growth is now projected at 4 percent for both 2024 and 2025. However, inflation is anticipated to decline to only 4.5 percent by the end of 2024.
Despite security challenges, the Somali government remains committed to counterterrorism efforts and transitioning from the African Union Transition Mission by January 2025. Potential risks include climate shocks and regional security issues.
Following discussions with the Executive Board, Deputy Managing Director Bo Li stated: "The Somali authorities’ reform momentum has been sustained and performance under the Fund-supported Extended Credit Facility Arrangement has been strong, despite difficult domestic and regional conditions."
Executive Directors acknowledged Somalia's achievements in reaching its HIPC completion point in December 2023 and its ongoing commitment to economic reforms. They highlighted risks related to fragility, geopolitical tensions, climate change, and food insecurity while emphasizing continued reform as vital for economic resilience and poverty reduction.
Directors stressed that strengthening domestic revenue mobilization is essential for fiscal sustainability amid decreasing external grants. They also noted progress in fiscal federalism and customs modernization while advocating for careful fiscal assessments before implementing wage bill and pension reforms.
Governance improvements at Somalia's central bank were welcomed alongside financial deepening initiatives. Directors supported plans to reintroduce the Somali shilling through a currency board arrangement but advised a gradual approach supported by complementary policies.
Efforts to combat corruption were commended as directors urged further action against AML/CFT deficiencies. Continued resilience building was recommended through education access expansion and climate resilience measures.
The next Article IV consultation with Somalia is expected per standard IMF consultation cycles.