Washington, DC – The International Monetary Fund (IMF) staff team, headed by Ms. Laura Jaramillo, has concluded discussions with Somali authorities in Istanbul and Washington, DC, concerning the 2024 Article IV consultation.
The talks led to a staff-level agreement on the second review of Somalia’s Extended Credit Facility (ECF) arrangement, initially approved by the IMF’s Executive Board in December 2023, pending final approval.
In her statement, Ms. Jaramillo highlighted an optimistic economic outlook for Somalia, with real GDP growth projections revised upward to 4% for both 2024 and 2025, reflecting positive developments in agriculture, exports, and remittances. Inflation is anticipated to decrease to 4.5% by the end of 2024, though at a slower rate than previously expected.
Despite these economic improvements, Somalia faces significant challenges, including ongoing security issues and the transition of the African Union Transition Mission to a new force by January 2025. External risks such as climate shocks, regional security, global economic slowdown, and commodity price hikes also loom large.
Fiscal policy in Somalia is geared towards increasing domestic revenue to cover operational expenditures by 2027, while expanding spending on education and health. The 2024 fiscal performance aligns with expectations, projecting a deficit of 0.2% of GDP. The 2025 budget anticipates similar domestic revenues and deficit levels, contingent on sustained grant financing.
Somali authorities are pushing forward with fiscal reforms, including customs modernization, new taxation laws, and enhanced tax enforcement, as outlined in the Medium-term Revenue Roadmap. Public financial management reforms are also progressing, with notable advancements in payroll integrity and debt management capacity.
The Central Bank of Somalia (CBS) is focusing on institutional and financial sector reforms to deepen financial markets, improve regulatory frameworks, and combat money laundering and terrorism financing, aligning with international standards.
The IMF’s staff-level agreement reflects a cautious optimism about Somalia’s economic trajectory, emphasizing the need for continued international support and effective policy implementation amidst a challenging environment.
