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Somalia inches closer to debt relief-IMF

Storyline:Business, National News

By T. Roble

Somalia has registered remarkable progress critical in achieving debt relief, the International Monetary Fund has said but called for accelerated implementation of financial sector reforms.

In a statement following the completion of the first review of the third Staff Monitored Programme (SMP), the IMF staff sounded up beat over the country’s chances of moving towards the Decision Point threshold under HIPC initiative.

“We are hopeful that following the satisfactory completion of SMP III, which will expire in the Spring 2019, a successor IMF program could be designed to meet the conditionality of an Upper Credit Tranche (UCT) arrangement and pave the way to move Somalia toward the Decision Point under the HIPC Initiative,” the statement read in part.

The first step towards debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative is for a country to reach the Decision Point. In this stage, a country must be eligible for World Bank’s International Development Agency which Somalia qualified for in October. Secondly, a country must have established a track record of reform and sound policies through IMF and World Bank-supported programmes such as SMP.

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To reach the decision point also, countries seeking debt relief must develop Poverty Reduction Strategy Papers. Somalia could upgrade the National Development Plan as a PRSP.

The IMF team added Monday Somalia’s economy was now recovering following a devastating drought in 2017. Gross Domestic Product (GDP) growth is projected at 3.1% while inflation is set to go down to 3.5% from last year’s 5.5%, the IMF said. The economy grew at 2.3% in 2017.

The global lender has however called for financial sector reforms including regulation of the mobile money sector which the World Bank said in August weak regulation could expose the country to macroeconomic effects in case of any disruptions.

“The team stresses the importance of accelerating the implementation of financial sector reforms, with priority placed on the restructuring of the central bank and regulating the mobile money sector.”