Karachi, The International Monetary Fund (IMF) has approved a new 36month Extended Credit Facility (ECF) arrangement for Somalia, totaling SDR 75 million (about US$100 million). This arrangement, which includes an immediate disbursement of SDR 30 million (about US$40 million) for budget support, marks a continuation of the IMF’s support for Somalia’s economic reform and growth.
According to International Monetary Fund, this new ECF arrangement follows the successful completion of Somalia’s previous ECF program, approved in 2020, and the attainment of the Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative. The approval of this facility is a recognition of the Somali authorities’ commitment to sustained economic reforms, despite facing numerous challenges.
Somalia has demonstrated considerable progress in strengthening key economic and financial institutions, as well as improving governance. These achievements, including reaching the HIPC Completion Point, underscore the country’s dedication to reform implementation. However, Somalia continues to confront significant challenges, including economic, social, security, and climate risks. An estimated 54 percent of the population lives on less than US$2 per day, highlighting the urgent need for growth to alleviate poverty, address social needs, and generate jobs for the youth.
The new IMFsupported program aims to support the authorities’ postHIPC reform strategy. It is designed to further strengthen key economic institutions, promote macroeconomic stability and growth, and align with Somalia’s national development plan and the government’s longterm vision. The program will be accompanied by extensive IMF capacity development assistance, supported by the Somalia Country Fund.
The fiscal policy under this program will balance the need for higher development expenditure with fiscal sustainability, taking into account capacity constraints. External financing is expected to consist solely of grants and concessional loans to preserve debt sustainability. A key pillar of the reform strategy is increasing domestic revenues, including the implementation of a new income tax law. Efforts to improve public financial management will focus on payroll integration, expenditure controls, fiscal transparency, strengthening debt management, and public investment management capacities.
The program also emphasizes the continued improvement of the Central Bank of Somalia’s institutional capacity, including in the context of currency reform, to foster financial deepening and inclusion. Progress in reforms to improve antimoney laundering and countering the financing of terrorism (AML/CFT) and governance will also be crucial to promote private investment in Somalia.