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Hope for donor aid flow after IMF and Somalia deepen engagement

The IMF lauded the Federal Government of Somalia (FGS) for its efforts to rebuild the country’s infrastructure and key institutions since 2012.

Special Correspondent

The International Monetary Fund (IMF) is set to deepen its support for Somalia in rebuild­ing its financial system and strengthening economic governance, raising hope for re­sumption of donor support. The Fund said it had agreed to undertake a 12-month Staff-Monitored Programme (SMP) to assist and monitor the country’s reforms of government operations and fiscal manage­ment. “To support the authorities’ reform effort, we have reached a staff-level agreement on a 12-month SMP starting in May 2016. This is a significant milestone for Somalia, marking the move toward normalizing relations with International Financial Institutions” an IMF mission led by Rogerio Zandamela said.

“The programme will focus on policies to improve gov­ernance and fiscal management, strengthen institutions, foster financial sector development, and fill considerable data gaps. Technical assistance and capacity building will be an integral part of the programme”. The SMP doesn’t come with monetary support but promises to bestow goodwill on Somalia’s commitment to governance re­forms. A similar programme for Afghanistan has helped to mobilise billions of dollars in donation pledges as the nation recovers from years of armed conflict.

“To support financial sector development, the pro­gramme will initiate a comprehensive currency reform, and strengthen licensing, supervision and regulation of commercial banks and money transfer businesses” the IMF further said. Somalia budget preparation and im­plementation been in the spotlight due to a mismatch in revenue and expenditure, leading to massive pile up of debt which has damaged the country’s creditworthiness and opened doors for plunder.

“In particular, the programme envisages reforms to raise domestic revenue and improve budget preparation and execution. It emphasises the implementation of a recently-adopted arrears management strategy, and the continuation of public financial management reforms to enhance the transparency of, and accountability for, gov­ernment operations,” said Zandamela, who led the IMF mission on a visit to Nairobi from March 30 to April 5, 2016 to discuss the SMP with Somali authorities.

The IMF lauded the Federal Government of Somalia (FGS) for its efforts to rebuild the country’s infrastructure and key institutions since 2012.

“Despite the difficult socioeconomic conditions, recent efforts by the Federal Government of Somalia (FGS) are bearing fruit. Economic growth in 2015 was estimated at 3.7 per cent and inflation at 1 per cent. However, in the fiscal area, insecurity and the war-induced destruction continue to hamper revenue collection and the delivery of services to the population,” the Fund said.

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