The top United Nations official for Somalia has welcomed the country’s recent adoption of a federal budget as a major milestone in its economic development, bringing it one step closer to gaining access to funds from international financial institutions.
“This is a sign of just how far Somalia has come over the past few years – it’s getting closer to being able to stand on its feet financially, like most other members of the international community. Once key reforms and revenue collection measures are working, Somalia will be able to receive grants and concessional funding from international financial institutions, instead of relying so heavily on donors for its financial needs,” said the Secretary-General’s Special Representative for Somalia, Michael Keating.
“What this means for the Somalis on the street is the real prospect of more schools, hospitals and other much-needed infrastructure as the government will be able to borrow money at fair interest rates on international markets,” he added. “It’s also a sign of growing stability, and the previous and current governments should be commended for their efforts in reaching this point.”
The International Monetary Fund (IMF) says Somalia owes $5.2 billion to its international creditors. Its parliament approved a 2018 budget last week, and the $274 million package is a significant step towards meeting the fiscal reform requirements of the IMF’s ‘Staff Monitored Program’ (SMP) for the east African country.
The SMP is designed to foster economic reconstruction efforts and enable countries to establish a track record of policy and reform implementation. Somalia had already completed its first SMP in 2016-2017.
“We are encouraged by the authorities’ commitment and by the pace of reforms to restore key economic and financial institutions, and welcome their efforts to keep the program on track,” the IMF said in a news release following its meeting with Somali authorities last week. “The authorities’ performance under the SMP through September 2017 was broadly satisfactory.”
A final decision on Somalia’s compliance with the requirements of the SMP for 2017 will be made by the IMF next year, and negotiations will be initiated on a follow-on SMP.
Special Representative Keating called on the country’s leaders to ensure that next year’s assessment of Somalia’s progress is a positive one, with any political differences resolved through dialogue and a spirit of goodwill.
“Political stability can only help Somalia in this regard,” he said. “It will help attract both public and private investment, and reinforce the country’s progress towards financial empowerment.”
Somalia has been unable to service its foreign debt since civil war broke out in 1991.
Plagued by drought and armed conflict, as well as under-development, Somalia currently relies on international donors for much of its financial needs.
Federal President Mohamed Abdullahi Mohamed ‘Farmaajo’ has repeatedly called on the country’s international creditors to grant Somalia debt relief under the so-called Heavily Indebted Poor Countries Initiative (HIPC), which the IMF and World Bank established in 1996 to ensure that no poor country faces a debt burden exceeding its capacity to service and manage.