Somalia: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Somalia

IMF Staff Country Reports, July 29, 2015

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Canonical URL: Somalia: 2015 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Somalia

Somalia is described as a fragile state emerging from a protracted civil war.
In 1991, the government was toppled by armed opposition groups, leading to implosion of the central government and devolution of power to administrative regions.
The Fund recognized the Federal Government of Somalia on April 12, 2013, paving the way for staff to provide policy advice and technical assistance.
Somalia has been welcomed back as an active member of the Fund but remains ineligible for financial assistance pending the clearance of its longstanding arrears.
Political and security situation: challenging, with complex clan politics and high turnover in the members of the economic team undermining policymaking.
Political timeline noted: a new government took office on February 18, 2015, and presidential elections are planned for September 2016.
Publication date on the landing page: July 29, 2015.

General focus: immediate and medium-term actions to build institutions and policy frameworks for fiscal and financial management.

Capacity building and governance
- Concerted action is needed to build institutions and improve governance to support sustainable, inclusive growth, and poverty reduction.
- Urgent efforts required to set in place sound mechanisms and institutions to ensure that prospective natural resource wealth, notably hydrocarbons, is well managed.
- Considerable donor assistance is required to help Somalia meet these challenges.

Fiscal
- Decisive steps are necessary to build fiscal discipline, underpinned by realistic budgeting and effective implementation systems, including commitment controls.
- The 2015 budget needs to be revised in light of revenue shortfalls.
- An emergency revenue mobilization plan and an expenditure review are warranted.

Financial sector
- Efforts are needed to develop the currently rudimentary financial system.
- Swift action is required so that remittances can be channeled through the international banking system.
- Currency reform should not be implemented until prerequisites are in place.
- Given the extent of dollarization and the absence of monetary policy instruments, the central bank is unable to conduct monetary policy.

The latest prior Article IV consultation was on November 13, 1989, focusing on the low priority attached by the government then to better controlling unproductive spending and on the need for better economic and social services.
The Fund has provided policy advice and technical assistance since recognition of the Federal Government on April 12, 2013, but financial assistance remains constrained by arrears clearance requirements.

Subject: Banking, Budget planning and preparation, Currencies, Expenditure, Infrastructure, Labor, Money, National accounts, Public financial management (PFM)
Keywords: Africa, Budget planning and preparation, budget revision, CR, Currencies, fund staff estimate, Global, government, hypothecated revenue, IMF mission chief, IMF TA support, Infrastructure, ISCR, Rev. budget, Somali authorities, trade tax