November 28, 2022

IMF reaches preliminary agreement with Somalia on new three-year loan but arrears must be cleared first

The International Monetary Fund (IMF) has reached a preliminary agreement with Somalia on a new three-year loan under an extended credit facility (ECF) and an extended fund facility (EFF).

The preliminary agreement is subject to the approval of management and the IMF Executive Board and Somalia clearing its arrears to the IMF.

An ECF allows the borrowing country to take out money over an extended period of time rather than reapplying for a loan each time it needs money while an EFF is a medium-term arrangement which allows countries to borrow a certain amount of money, typically over a three- to four-year period. The EFF aims to address structural problems within the macroeconomy that are causing chronic balance of payment inequities.

IMF made the announcement in Washington DC on Monday after IMF team led by Allison Holland completed a 10-day mission – January 6—16 – with Somali authorities in Ethiopia.

Ms. Holland commended progress made in Somalia, adding that the country’s sustained commitment to economic reforms has brought debt relief under the HIPC Initiative closer.

She said Somalia and IMF staff team reached a preliminary agreement on policies that could constitute the basis for a new three-year macroeconomic reform program with the IMF, to be supported by the ECF and EFF arrangements.

“The program is intended to guide Somalia’s reforms over the period between the HIPC Decision and Completion Points. It will also support the authorities as they implement their Ninth National Development Plan (NDP9)—their strategy for inclusive growth and poverty reduction.

“The key policy pillars of this new program build on the reforms achieved under successive SMPs and will include (i) further strengthening public financial management; (ii) continuing to increase domestic revenue mobilization; (iii) continued deepening of capacity at the Central Bank of Somalia; and (iv) further efforts to enhance governance and reduce the perception of corruption,” she added.

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Holland who met with Finance Minister Abdirahman Dualeh Beileh; Minister of Planning, Investment and Economic Development Gamal M Hassan; Central Bank Governor Abdirahman Mohamed Abdullahi; Ms. Hodan Mohamoud Osman, Secretary of the Senate Finance Committee; Mr. Mohamud Abdirahman Sheikh Farah, Chairman of the House of the People Commerce Committee; and other senior officials, said the agreement represents another step towards reaching the HIPC Decision Point and eventually achieving debt relief under the HIPC Initiative.

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