The International Monetary Fund (IMF) has reached a staff-level agreement with Somali authorities regarding the third review of the Extended Credit Facility (ECF) arrangement. This development follows discussions held in Nairobi from May 6 to May 15, 2025, led by IMF representative Ran Bi. The agreement is pending approval from the IMF's Executive Board.
Ran Bi expressed satisfaction with the progress made, stating, "I am very pleased to announce that the Somali authorities and the IMF team have reached a staff-level agreement on policies to complete the third review under the ECF arrangement approved in December 2023 for total access of SDR 75 million (about US$100 million)." If approved by the Board, this would allow access to SDR 7.5 million (approximately US$10 million), increasing total disbursements under the arrangement to around US$70 million.
Somalia's economic performance in 2024 showed a real GDP growth of 4 percent, mainly due to recovery in agriculture and eased inflation at 5.6 percent by year-end. However, projections for 2025 indicate a slowdown in GDP growth to 3 percent due to reduced foreign aid and challenging weather conditions. Inflation is expected to decrease slightly to 4.9 percent by end-2025 but at a slower rate than previously forecasted.
The report highlights significant risks tied to potential further declines in foreign aid, which could impact food security and poverty levels while undermining institutional rebuilding efforts. The ongoing transition to the African Union Support and Stabilization Mission in Somalia also presents security challenges.
Despite these hurdles, Somali authorities remain committed to fiscal discipline while addressing priority needs. A fiscal surplus was achieved in 2024 through improved customs duties and tax administration. For 2025, a modest fiscal deficit of 0.2 percent of GDP is anticipated despite strong revenue collection efforts.
Fiscal reforms are advancing steadily with ongoing customs modernization and new income tax laws among key initiatives aimed at strengthening public finances. Additionally, efforts are underway at Somalia's Central Bank (CBS) to enhance financial stability through regulatory improvements and preparations for currency exchange arrangements.
Continued support from international partners remains vital as Somalia navigates economic uncertainties and significant risks.
The IMF mission expressed gratitude for productive engagements with various stakeholders including Finance Minister H.E. Bihi Iman Egeh and Central Bank Governor H.E. Abdirahman Mohamed Abdullahi during their visit.