The Somali government said it will sustain a reform program that it has initiated in various sectors following the conclusion of an International Monetary Fund (IMF) mission to the country.
“It is clear that real progress is being made in the reform program and we remain committed,” Somali Finance Minister Abdirahman Beileh said in a brief statement, welcoming the outcome of the IMF mission’s second and third reviews of the extended credit facility to Somalia.
The IMF mission, which concluded the review mission on Monday, said Somalia’s economy is expected to grow 3.2 percent in 2022 but faces downward risks.
In a statement released on Monday, the IMF said the country’s growth will be supported by remittances, foreign direct investment, and increased public spending as grant financing unlocks once the elections process is complete.
It said inflation is expected at 6.5 percent in 2022 due to higher food and energy prices while the fiscal deficit is expected to narrow to 0.5 percent of gross domestic product (GDP), as revenues and budget grants recover.
“However, near-term risks include the evolution of the pandemic, political uncertainty related to elections, prolonged drought or new climate shocks, resurgence of desert locust infestation, and the potential implications from geopolitical uncertainties,” the IMF said. “Shortfalls in budget grants would also create risks for the budget.”
It said that given revenue shortfalls in 2021, mostly because donor budget grants are on hold until elections are completed, the government has been proactive in restraining expenditure, and the overall deficit of 1.2 percent of GDP was financed with the fiscal buffer and some IMF disbursements.
The lender warned that political uncertainty and election delays can result in the automatic lapse of the IMF-supported program, which will jeopardize the disbursement of budget support grants and derail the timing for full debt relief.
“It is therefore critically important that disbursements of budget grants resume once the elections are completed,” the IMF said.
