Somalia: Staff Report for the 2017 Article IV Consultation and First Review Under the Staff-Monitored Program—Informational Annex
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International Monetary Fund. Middle East and Central Asia Dept.
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Publication Date:
26 Feb 2018
eISBN:
9781484343838
Language:
English
Keywords:
ISCR; CR; government; Somali authorities; authority; HIPC decision point; consumer price index; core government function; implementation unit; job creation; support government; Budget execution and treasury management; Budget planning and preparation; Consumer price indexes
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2017 Article IV Consultation and First Review Under the Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Somalia

Abstract

2017 Article IV Consultation and First Review Under the Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Somalia

Fund Relations

(As of December 31, 2017)

Membership Status: Joined: August 31, 1962; Article XIV

General Resources Account

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SDR Department

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Excluding SDRs allocate and placed in escrow account under the Fourth Amendment of the IMF’s Articles of agreement (SDR 4,156,315), such holdings will be available to Somalia upon the settlement of all overdue obligations to the Fund

Outstanding Purchases and Loans

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Latest Financial Arrangements

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Overdue Obligations and Projected Payments to the IMF (SDR Million) 1/

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Implementation of HIPC Initiative: Not yet reached decision point.

Implementation of Multilateral Debt Relief Initiative (MDRI): Not applicable.

Implementation of Catastrophe Containment and Relief (CCR): Not applicable.

Exchange Rate Arrangement

The official currency of Somalia is the Somali shilling (SOS). The de jure exchange rate arrangement is undetermined. Due to the absence of administrative measures controlling the level of the exchange rate and the inoperative status of the CBS in the foreign exchange market, the de facto exchange rate arrangement is classified as free-floating. The de facto currency is the U.S. dollar, which is used for the majority of transactions. The U.S. dollar banknotes are used as cash currency with Somali banknotes serving as a sub-denomination. Banks transact only in U.S. dollars. Mobile phone payments, which are widely used, are also only denominated in U.S. dollars. The Somali shilling, which is virtually all counterfeit, is used only for small cash payments, particularly in remote areas. Also, neighboring countries’ currencies are used in border areas. Residents exchange U.S. dollars and shillings at a freely determined market exchange rate. This rate varies across federal member states (the Federal Government of Somalia is a federation of five states, excluding Somaliland and Banadir region). The domestic exchange markets have remained generally stable across states. For example in Mogadishu, the SOS/U.S. exchange rate ranged between 21,197 and 23,995 since January 2015.

Somalia still avails itself of the transitional arrangements of Article XIV; however, it no longer maintains restrictions under Article XIV. At the time of Somalia’s 1989 Article IV consultation, the following measures subject to Fund’s approval under Article VIII remained in effect: (i) a multiple currency practice and exchange restricting arising from the imposition of a 10 percent levy on all applications for purchases of foreign exchange under the commodity import program, (ii) a multiple currency practice arising from different exchange rates applicable to official transactions and to transactions in external accounts and to import/export accounts, and (iii) an exchange restriction evidenced by some external payments arrears. However, based on the information provided by the authorities and gathered by staff, staff understand that these measures are no longer in effect. Staff will continue to monitor developments in the exchange system and encourage the authorities to take the necessary steps to accept their obligations under Article VIII at the appropriate time.

Article IV Consultation

The Executive Board concluded the last Article IV Consultation with Somalia on February 3, 2017 (the third since November 18, 1989).

Technical Assistance (TA) 2013–17

Somalia: Completed TA, 2013–17 1/

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Source: International Monetary Fund.

Based on information through December 2017.

Resident Representative

Mr. Samba Thiam, resident representative for Somalia, has been posted in Nairobi since December 1, 2014.

IMF-World Bank Collaboration

(As of December 31, 2017)

The IMF and the World Bank Group country teams for Somalia coordinate closely on macroeconomic and structural issues. Collaboration is becoming more regular as both Institutions scale up their engagement with Somalia. Notable areas of collaboration Include:

  • Fiscal: The IMF and the World Bank have collaborated closely on fiscal policy matters. There is an agreement on fiscal priorities and policies between the two institutions. Specifically, both teams have urged the authorities to: (i) prepare and execute a realistic budget; (ii) improve public financial management, (iii) implement the revenue mobilization plan; and, (iv) find agreement between federal and sub-national governments on fiscal federalism. There has been extensive collaboration on public finance management issues, particularly, on finalizing the implementation of the Treasury Single Account and the Financial Management Information System. More recently, the World Bank team began developing a macro-fiscal framework. Additionally, the teams have collaborated closely in assisting the authorities with the preparation and management of the 2017 and 2018 budgets and supporting public financial management. The WB continues to provide critical budget support through the Recurrent Costs and Reforms Financing program (RCRF), which reimburses eligible expenditures for salaries and some non-salaries recurrent costs.

  • Financial sector: Over the past two years, the IMF and World Bank have provided support to the Central Bank of Somalia’s (CBS) capacity to supervise the country’s commercial banks and money transfer bureaus (MTBs), respectively. During that period, regulations were adopted, an annual relicensing regime implemented, collection of financial data regularized, and on-site inspections started. This support also covered AML-CFT issues, particularly for MTBs. Moving forward, the IMF and World Bank will collaborate on assisting the authorities in developing and implementing a financial sector reform road map to improve intermediation to support economic growth.

  • External debt statistics: In 2014, the IMF and the World Bank collaborated in the establishment of the Technical Working Group on Somalia’s Debt. The Bank and Fund have co-chaired a number of high level roundtables at the World Bank and IMF Spring Meetings in Washington, D.C.

  • Macroeconomic statistics: Somalia’s macroeconomic statistics depend upon collaboration between the IMF and the World Bank. A few significant examples of such collaboration include:

    • (i) a World Bank funded household survey, currently on its second wave, which enabled the IMF to provide assistance in delivering: (a) objective estimates for household final consumption expenditure to derive GDP; and, (b) appropriate expenditure patterns for estimating the Consumer Price Index;

    • (ii) World Bank implementation of the Core Banking system at the CBS, which will improve financial data and operations, a core mandate of the Bank and will help the Fund support financial stability in Somalia; and,

    • (iii) efforts to improve trade in goods data via technical assistance and training for the Customs Department at the Port of Mogadishu.

Relations With the World Bank Group1

(As of December 31, 2017)

The Somalia Interim Strategy Note (ISN) was endorsed by the World Bank Board in December 2013 and remains the overarching strategy document for the Bank Group’s engagement in Somalia. Its objective is to lay the foundations for a solid poverty reduction strategy and progress towards shared prosperity in the long term. These goals will be reached by delivering initially on selected priorities under the Peace and State-building Goals (PSGs) of the Somali Compact, a high-level mutual accountability framework endorsed at the Brussels Conference in September 2013 and are now replaced in a new Partnership Agreement with the new Federal Government at the London Conference of May 2018. The ISN is structured around two priorities: (i) strengthening core economic institutions; and, (ii) expanding economic opportunity.

Under Priority I (Strengthening Core Economic Institutions), the World Bank is focusing on improving economic governance, including macro-fiscal and public finance management, as well as building statistical capacity and supporting the establishment and implementation of a sound regulatory framework in strategic economic sectors. Key trust-funded activities under this area include: (i) a set of core systems strengthening projects (the Recurrent Cost and Reform Financing, Public Financial Management Strengthening, and Capacity Injection/Civil service strengthening); (ii) a financial governance program undertaken in partnership with the IMF and the African Development Bank; (iii) an information and communications technology (ICT) regulatory support project; and, (iv) a petroleum sector program. Policy dialogue and economic and sector work focuses inter alia on macro- and fiscal planning, revenue mobilization, inter-governmental fiscal relations, and statistical strengthening and socio-economic data collection.

Under Priority 2 (Expanding Economic Opportunity), the World Bank is focusing on supporting job creation through private sector investment through public-private partnerships (PPPs), public private dialogue, and targeted financial support; as well as financing basic rehabilitation of infrastructure for employment generation and productivity. Key activities under this priority include: (i) two projects on private and financial sector development; (ii) an urban development project; and, (iii) an energy sector support project. While the UN leads assistance in both the health and education sectors, the World Bank is preparing the ground programming with analytical work.

Activities are underway in developing the new overarching strategy document for WBG engagement in Somalia. The Country Partnership Framework (CPF) aims to make the country-driven model more systematic, evidence-based, selective, and focused on the Bank’s twin goals of ending extreme poverty and increasing shared prosperity in a sustainable manner. Used in conjunction with a Systematic Country Diagnostic (SCD), the CPF will guide WBG support in Somalia. The SCD identifies the binding constraints to reducing poverty and increasing shared prosperity and—based on these—the CPF sets out the main development goals that WBG aims to help the country achieve, and proposes a selective program of indicative WBG interventions. The CPF will be based on robust analytics, such as the SCD, Public Expenditure Reviews, consultations with stakeholders, and knowledge products such as the Poverty Profile and Somalia Economic Update. The CPF provides an opportunity to create a five-year engagement plan based on Somali guidance, and for the Bank to validate (or re-orient and adapt) the WBG portfolio to the evolving political and economic contexts. The CPF also develops scenarios for International Development Assistance (IDA) re-engagement The SCD and CPF, both a first for Somalia, will be completed in 2018.

Active Projects and Pipeline

As Somalia is in arrears to the World Bank, the World Bank project portfolio is primarily supported by the Somalia Multi-Partner Fund (MPF), a multi-donor trust fund, launched in August 2014 with approximately $320.5 million in contributions from ten donors (of which $252.6 million is paid in) and expected to grow year by year.2 The State- and Peace-Building Fund (SPF), a World Bank-administered global MDTF, has also contributed $36 million to Somalia since 2012, providing the seed money for several of the projects that have since been scaled up through the MPF.3 The active portfolio consists of 15 projects totaling $161 million in signed grants, of which $118 million has been disbursed already.

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Multi-Partner Fund Protfolio by Peace and State-building Goals

(Millions of U.S. dollars)

Citation: IMF Staff Country Reports 2018, 055; 10.5089/9781484343838.002.A002

Recurrent Cost and Reform Financing (RCRF) Program, Phase II: Funded by the MPF, the objective of the RCRF is to support the government to execute a credible and sustainable payroll and to establish the foundation for efficient budget execution and payment systems for the non-security sectors in the FGS and eligible sub-national authorities. The RCRF supports the government to lay the foundations for a simple system of inter-governmental dialogue, while providing the associated resource transfers to strengthen inter-governmental trust. Intergovernmental transfers have increased in 2017 largely through the support of the RCRF. Ultimately, the establishment of these fiscal arrangements should promote greater equity and resource distribution among federal and sub-national governments. In addition to support at the level of the FGS in Mogadishu, Federal Member States (FMS), including Jubaland, Puntland, South West and Galmudug are also receiving transfers for core government functions. Newly formed Hirshabelle, the last FMS, is preparing the readiness criteria for project support. The RCRF expanded its scope in 2017 through the surge support initiative, the temporary, policy-base financing that creates fiscal space for public works activities and non-salary recurrent costs. Surge support is based on enabling Somali authorities to deliver public services to citizens and the principles of government leadership, accountability and consistency in relations between FGS and each FMS. The surge support is based on conditional agreements of benchmarks, as funds are delivered on upon meeting these benchmarks. Parallel to these benefits, the surge support provides institutional leverage to support key reforms—through conditioned incentives—through ongoing MPF Governance projects, including PFM and CIP.

Analytical and Technical Assistance on Education: Funded by the MPF, this project provides complementary support to component 3 of the RCRF, which has planned support for: i) the establishment of a basic accountability system for the education and health sectors, ii) payment of salaries and allowances for eligible teachers and health workers and iii) eligible non-salary recurrent costs. The objective of this small-scale TA package is to address critical knowledge and information gaps in education sector and provide technical assistance to strengthen the capacity of the public education delivery system to manage a diversity of service providers and address the challenges of policies, governance, access, quality and equity in a sustainable manner.

Capacity Injection Project (CIP): Funded by the MPF, the objective of this project is to enable the government fill critical capacity gaps in the civil service, and strengthen the capacity of key ministries and agencies to perform core government functions. Project components cover: (i) developing capacity for key cross-cutting government functions; (ii) strengthening the policies and procedures for civil service management; and, (iii) aiding policy management, coordination and monitoring capabilities at the center of government. CIP supports 10 FGS beneficiary institutions and 9 in Puntland. As of December 2017, 175 civil servants have been placed in Bis through a merit-based recruitment process, of which approximately 25 percent have been women.

Somaliland Civil Service Strengthening Project: Funded by the MPF, this is a sister project to the CIP tailored to the specific needs of Somaliland for civil service reform. The objective of the project is to strengthen the human resource and policy management functions of selected line ministries and central agencies. Its core components include: (i) developing capacity for key cross-cutting government functions; (ii) strengthening the policies, procedures and systems for civil service management; and (iii) strengthening policy management, coordination and monitoring capabilities at the center of government.

Public Financial Management Strengthening Project, Phase II: Funded by the MPF, the objective of the project is to establish systems for transparent and accountable public funds management, building on the work launched under Phase I. It focuses on the implementation of medium-term fiscal frameworks to underpin: (i) planning budget preparation; (ii) managing revenue mobilization and tax administration; (iii) developing Somalia’s financial management information system; (iv) managing expenditure control; (v) overseeing procurement, accounting and financial reporting; (vi) conducting auditing and monitoring; and, (vi) establishing structures to oversee public financial management reforms in Somalia.

Financial Governance Policy Dialogue: Funded by the MPF, the objective of this program is to provide technical advice and facilitate policy dialogue to strengthen transparency and accountability in the areas of strategic public procurement and concessions, asset recovery, and other selected areas of financial governance. In 2014 the FGS and the international community established the Financial Governance Committee (FGC), a hybrid Somali-international body that provides a forum for dialogue on strategic financial governance issues. This project provides assistance to the FGC with: (i) predictable and reliable funding for its basic operations; and, (ii) technical assistance to help advance its work program. As of December 2017, the FGC had issued confidential assessments for 28 signed or draft contracts. In April 2017, FGC published the Financial Governance Report, which sets out the financial governance priorities that the FGC has identified for the coming year to strengthen ongoing state-building efforts.

Petroleum Sector Inclusive Development: Funded by the MPF, the objectives of this project are to: (i) facilitate a process to harmonize issues of ownership, control and revenue sharing in the petroleum sector; (ii) support the development of a petroleum strategy and a policy, legal and fiscal framework; and, (iii) build government capacity to negotiate and manage petroleum contracts. A review of the legal and fiscal framework for petroleum sector has been completed and a petroleum legal framework is under development. A new Upstream Petroleum Bill, including a Model Production Sharing Agreement (PSA), and the first set of Upstream Regulations (a general upstream regulation and two regulations covering environment, health, safety) have been drafted, with support of the Bank and AfDB. The Model PSA was reviewed by the Financial Government Committee.

MPF Knowledge Fund / Knowledge for Results (K4R): Funded by the MPF, the objectives of this program are to: (i) enhance the development impact of domestic policies and development partner interventions through better knowledge of socio-economic realities as well as political economy constraints; (ii) promote basic accountability through better information on availability and use of public resources (including from development partners), and; (iii) revitalize the strategic planning process, through tailored support to regions, engagement with a broader set of stakeholders. K4R activities fall under four broad components: (i) Poverty and Distributional Analysis and Statistics; (ii) Macro-Fiscal Framework; (iii) Public Expenditure Reviews (PER) and Fiscal Federalism; (iv) Growth drivers.

ICT Sector Support in Somalia, Phase II: Funded by the MPF, the objective of the project is to support the ICT Sector in Somalia by contributing to establish an enabling environment and by encouraging efficiency and equity in access to connectivity. The program aims to allow the ICT sector grow and support connectivity benefits to the government and the citizens. The scope of the work combines technical assistance, and provision of goods (e.g., communications rooms in ministries), and services (e.g., connectivity and bandwidth support for the higher education).

Supporting Remittance Flows to Somalia (SRFS): Funded by the MPF, the objective of this project is to Work alongside the Central Bank of Somalia (CBS) to implement a number of activities aimed at tackling key deficiencies affecting the remittance market in Somalia until a sounder financial system is in place, and to accelerate and support financial system development. The work is guided by the Somali Remittances Stakeholder Advisory Council, co-chaired by the Central Bank Governor and the World Bank Country Director and with representatives from Somalia, the World Bank, IMF, AfDB, USG, UK and IGAD. The Council has met quarterly since June 2015. To strengthen the regulatory framework for the Money Transfer Operator (MTO) sector, the World Bank worked with the CBS to draft and enact MTO Operating Regulations based on the recently adopted AML/CFT Law. The Trusted Agent procured through this project supervises all licensed MTOs alongside the CBS. Outreach sessions have been conducted by the Trusted Agent and CBS with MTOs regarding the new regulations.

Somali Core Economic Institutions and Opportunities Program (SCORE) Funded by the MPF, SCORE aims to: (a) improve the enabling environment for private and financial sector development; and (b) catalyze private investment and job creation. It builds on the achievements and lessons learned from SOMPREP 1 and 2 and expands the geographic coverage of interventions to not only cover Somaliland but also Puntland and southern and central Somalia. The program’s activities support i) strengthening central bank supervision and regulation; ii) improving the business environment by reducing the time and cost of starting and operating a formal business; iii) developing the port sector in Mogadishu (and possibly Kismayo, Marka and/or Bosaso); v) supporting the recovery of the private sector by providing matching grants to support small and medium-sized enterprises (SME) via the Somalia Business Catalytic Fund (SBCF); and promoting the development of SMEs through direct and indirect capacity building support via an SME Service Facility (SMEF) providing technical assistance, training and coaching services.

Somalia Investment Climate Reform Program (SICRP): Funded by the MPF and implemented by the IFC, this project aims to unlock private investment by removing selected barriers to doing business and support government and the private sector to create a conducive investment climate regime in Somalia. The SICRP provides support for: (i) the facilitation of a robust Public Private Dialogue (PPD); (ii) 3–4 areas measured by the Doing Business Survey; (iii) trade facilitation support and training; and (iv) improving government to business services (G2B). SICRP is implemented in close collaboration with SCORE.

Somali Urban Investment Planning Project (SUIPP) and Somali Urban Resilience and Recovery Project (SURRP): SUIPP is aimed at preparing the ground for the larger scale SURRP by providing (i) feasibility assessments and preliminary plans for selected urban investment and institutional strengthening activities and (ii) enhanced project preparation and implementation capacity of the municipalities of Mogadishu, Garowe, and Hargeisa, the Ministry of Public Works of the FGS and the Hargeisa Water Authority. All assessments and plans were finalized in June 2017 and are ready for investment pending financing. The SURRP will be developed in early 2018 after discussions with the client on priority investments and areas.

The Special Financing Facility for Local Development (SFF-LD) supports the construction and reconstruction of new and damaged infrastructure for local service delivery in targeted areas of Somalia and support the development of basic public investment management functions. The project builds on the work of the Norwegian-established Special Financing Facility. Whereas the RCRF takes on the recurrent costs component, the SFF-LD takes on the small-scale infrastructure component of this project. Construction. Projects in the first set of regions—Bay and Middle Shabelle—will break ground in December 2016; the second set of regions—Lower Shabelle, Nugaal and Bakool—has been confirmed with government counterparts. Each region has $700,000 for a project identified through consultation with local communities and authorities. The same government implementation unit used its emergency component to allow a response to the 2017 drought with essential water, sanitation and hygiene (WASH) services in the worst-affected areas. The success of the Contingency Emergency Response component is directly dependent on the use and strengthening of country systems, and the Bank’s flexibility and agility in a changing context.

The Somalia Power Sector Development Master Plan seeks to support the building blocks for the establishment of a modern energy sector in Somalia. The components of the program are: (i) developing a master plan that sets out priorities and investment sequencing in generation, transmission and generation over a 20-year period, and delivers detailed electrical infrastructure development plans for a number of urban areas; (ii) preparing a “Lighting Africa Somalia” investment; and, (iii) developing a renewable energy resource map for Somalia.

Water for Agro-Pastoral Livelihoods Pilot (WALP) Project4: The objective of the project is to build the government to implement small-scale water interventions to provide safe water for human consumption and sufficient quantities of water for livestock as inputs to enhancing fodder and agricultural production in targeted arid lands of Somaliland and Puntland. This will be done by piloting the development and implementation of under-utilized rural water supply technologies, including sand dams.

Economic and Sector Work

Statistical Strengthening and Socio-Economic Data Collection: The lack of available data and low attributable analysis is one of the major barriers for developing methods to combat poverty in Somalia. One of the components to the MPF Knowledge Fund (Poverty and Distributional Analysis and Statistics) is a Bank-Executed (BE) activity aimed at collecting socioeconomic, peace and state-building, and perception data representative of all accessible areas of Somalia. Using an innovative high-frequency computer assisted household survey, the project is providing vital household expenditure, socioeconomic and peace and state-building goal data. The instrument is tailored to collect data quickly, in highly insecure settings, and is designed to work in tandem with new econometric techniques to produce a reliable poverty profile and CPI base weights. A first wave of the survey was already implemented covering Somalis living in Mogadishu, urban and rural areas in Puntland and Somaliland, as well as in IDP settlements. The World Bank will support the roll-out throughout Somalia—combining high frequency surveys and more standard household surveys—to provide regular poverty, social and process data, as well as other relevant information that can be gathered through that instruments. This work will also support poverty assessments and other poverty analytical studies made possible by the data collection exercises. A comprehensive Poverty Profile, with findings from both waves, will be published in mid-2018.

Policies and Institutions for Economic Growth: Through the MPF Knowledge Fund, the World Bank is providing guidance to Somali authorities on how to develop economic policies, rebuild institutions of economic management, and provision of infrastructure and social services, which can generate stable economic growth and reduce poverty. This will involve carrying out fresh, comprehensive, and in-depth analysis of the Somali economy to understand how stable growth can be generated in the next three to five years. Examples of the analytical products under this component include the Somalia Country Economic Memorandum (CEM) on Agriculture, CEM on Digital and Physical Connectivity (financial services, ICT, transport and infrastructure), and stand-alone studies in ICT, livestock, and fisheries sectors.

Macroeconomic and Fiscal Planning: The World Bank worked with relevant ministries to support the development of a simple macro-fiscal framework for Somalia’s National Development Plan with clear linkages to the annual planning and budgeting process, as well as a simple public investment management framework covering financing modalities and time horizons.

Policy Engagement on Revenue Mobilization, Natural Resource Management and Inter-governmental Fiscal Relations: The World Bank plans to undertake an analysis to generate a better understanding of the Somali economy and potential sources for maximizing revenue generation. The work will focus on policy related issues and areas for advisory work, including supporting licensing and regulatory frameworks for telecommunications, ports management, ICT and the extractive industries. This will also include technical support on revenue management options for natural resource revenues. Inter-governmental fiscal relations engagement initially focuses on sharing relevant international experience with the government. Fiscal Federalism Forums, supported by the Bank, convene periodically to harmonize policies and practices related to revenue, resource sharing and regulation of key goods and services. Lastly, an environmental impact assessment has been requested by the Government and the concept note is under review.

Public Expenditure Reviews (PERs): The World Bank is supporting the production of regular PERs at both the federal and regional level, with the goal of closely monitoring the evolution of macro-fiscal and budgetary trends, and providing the underlying analysis for the Recurrent Cost and Reform Project. The World Bank has also supported a Security and Justice Public Expenditure Review as a joint exercise with the UN. This PER aims to unpack the fiscal implications of the current response to the threats facing Somalia, and the long-term implications by offering a data-driven and evidence-based analysis, not only of revenues and expenditures of the security sector, but of the violence and insecurity Somalia is facing.

Relations With the African Development Bank Group5

(As of Decmber31, 2017)

The Somalia Country Brief (CB) 2017–20 approved by the African Development Bank (AfDB) Board of Directors on November 3, 2017, builds on the Bank’s work under the CB 2013–16, and is aligned to Somalia’s National Development Plan (NDP) 2017–19 by directly supporting the Plan’s pillars associated with effective and efficient institutions, restoring strategic infrastructure, and building resilience. Thus, the CB’s overarching objective will be to “Build longer term resilience in Somalia, through targeted support to the development of relevant infrastructure, institutional capacity, and skills”. To achieve this objective, the CB will implement programmes under two main pillars: (i) Rebuilding key infrastructure to enhance resilience and diversify livelihoods; and (ii) Institutional capacity building and skills development for improved governance and job creation. The two pillars will also ensure that the Bank is able to deliver on the expectation that the authorities and international partners have of the Bank to take the lead in rehabilitating and developing Somalia’s infrastructure over the next few years.

Due to the arrears situation, resources from the AfDB group to Somalia have been committed mainly from the Transition Support Facility (TSF) Pillar I and III resources. In addition, resources have been committed from other instruments not affected by the existence of arrears such as the Special Relief Funds, the African Water Facility (AWF), African Legal Support Facility (ALSF), Rural Water Supply and Sanitation Initiative (RWSSI), Global Environmental Facility (GEF) trust funds. The CB 2017–20 will be financed through ADF-14 TSF Pillar I resources (i.e., UA 15m, $21.6m) and 50 percent of its ADF-14 PBA allocation (i.e., UA 7.5m, $10.7m). The remainder of the CB work programme will be financed from donor contributions to the AfDB Multi-partner Somalia Infrastructure Fund (SIF) which is part of a comprehensive, coherent and coordinated multi-partner initiative to assist Somalia in consolidating peace and moving along a path of long-term development. The SIF is one of the funding windows that was established under the framework of the Somalia Development and Reconstruction Facility (SDRF) for intermediating economic reconstruction and development finance assistance to Somalia. The SIF’s goal is to support and accelerate Somalia’s inclusive and sustainable economic recovery, peace and state building within the context of AfDB’s Strategy for Addressing Fragility and Building Resilience in Africa.

The Bank Group’s current approved portfolio consists of thirteen operations, of which eleven are national and two are regional, for a total commitment of UA 82.3m ($117.2m). In terms of sectoral distribution, the agriculture sector has the largest allocation, amounting to UA 47.05m ($67.1 m, 57 percent), followed by the water and sanitation sector at UA 15.63m ($22.3m 19 percent), social sector at UA 9.2m ($13.1m, 11 percent), and multisectorat UA 10.43m ($149m 13 percent). The portfolio’s average age is about 1.56 years, with an average disbursement rate of 21.13 percent. In addition to the Bank’s portfolio of projects, the African Legal Support Facility (ALSF) has been providing very valuable support to Somalia. The ALSF has assisted the FGS in preparing a model Production Sharing Agreement (PSA) and developing a PSA toolkit that will help in licensing onshore and offshore gas and oil exploration. The ALSF has also conducted capacity building for government officials, and is assisting the FGS with the review and renegotiation of a number of key concession agreements.

A large share of the resources that have been committed for Somalia include the UA 25m ($35.6m) Short Term Regional Emergency Response Project (STRERP). Somalia continues to face serious challenges including food insecurity as a result of recurring droughts. For this reason, the Bank’s Board of Directors approved, in July 2017, the STRERP, which falls within the context of the Bank’s broader “Say No To Famine” framework. Among other interventions, this project aims to stimulate the local private sector and reduce cross-border migration in search of food, water and pasture. The project also includes activities to put in place the preliminary building blocks that will strengthen links between the production, distribution and consumption hubs of food systems in the affected regions. This will help facilitate increased system-wide efficiency and longer-term resilience, which is aligned with the Bank’s High5s priorities, and particularly the Feed Africa Strategy.

The Bank will continue to play a leadership role in the dialogue related to the infrastructure pillar of the NDP. The Bank will also continue to participate in discussions related to broad economic development, PFM and financial governance issues. This will include active participation in dialogue on the country’s external debt arrears clearance and the HIPC process6, as Somalia’s normalization of its relationship with multilateral institutions will unlock access to resources (e.g. ADF and IDA) which are vital for funding the country’s infrastructure development programme. Furthermore, as the administrator of the SIF, the Bank will continue to play an active role in the SDRF Steering Committee. The Bank will benefit from the political and security dialogue in this forum, as this will help to identify risks to the new CB’s programme and also ensure that Bank supported projects ‘do no harm’ and directly contribute to Somalia’s state building.

The Bank’s analytical work will continue to be demand-led, ensure complementarity with the project pipeline, and remain selective to effectively inform country policy dialogue. During implementation of the CB 2017–20, emphasis will be on undertaking analytical work that directly helps to prepare quality projects in the indicative project pipeline. The analytical work will include an assessment of the Vocationai Training Sector, to understand what exists and identify the support required from the Bank to expand and develop one or more existing centre(s). These would be centre (s) that develop construction related skills, so that the rehabilitation of infrastructure and its subsequent maintenance is labour intensive and provides job opportunities for the unemployed, particularly vulnerable youths, in Somalia. A feasibility study for the establishment of a Somaiia Electrification Agency will also be undertaken to inform FGS and interested partners on the initial institutional steps that will be required to accelerate the development and formalisation of the energy sector. The Agency will, in the short to medium-term, be tasked with guiding and accelerating the formalisation and expansion of electricity supply. Additional analytical and knowledge work will be identified on an on-going basis during the country dialogue with the authorities and other stakeholders.

On the external debt database, the African Development Bank provided significant support to the Debt Management Unit (DMU) in the Ministry of Finance. More recently, the IMF has collaborated closely with the DMU to complete the external debt database, which is expected in 2018.

Statistical Issues

(As of December 31, 2017)

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Table of Common Indicators Required for Surveillance

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Note: The Somali authorities have provided fiscal, exchange rates, and public external debt data to the mission team during staff visits and this consultation.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-a-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

These columns should only be included for countries for which Data ROSC (or a Substantive Update) has been published.

This reflects the assessment provided in the data ROSC or the Substantive Update for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

1

Prepared by the World Bank.

2

Current donors are: Denmark, the European Union, Finland, Germany, Italy, Norway, Sweden, Switzerland, United Kingdom, United States and World Bank’s State- and Peace-Building Fund.

3

Including transfers to the MPF and Som-PREP II.

4

WALP is not funded by MPF

5

Prepared by the African Development Bank.

6

The Bank’s role to date (e.g. reconciling the debt, setting up a debt-management-unit) in the arrears clearance and HIPC process has been laudable in catalyzing the interest and momentum of other key development partners (including the IMF, USAID, WB, DfID and EU) who are central to the process.

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Cover IMF Staff Country Reports
Somalia: 2017 Article IV Consultation and First Review Under the Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Somalia
Author:
International Monetary Fund. Middle East and Central Asia Dept.
Volume/Issue:
Volume 2018: Issue 055
Publisher:
International Monetary Fund
ISBN:
9781484343838
ISSN:
1934-7685
Pages:
92
DOI:
https://doi.org/10.5089/9781484343838.002
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    Multi-Partner Fund Protfolio by Peace and State-building Goals

    (Millions of U.S. dollars)

Multi-Partner Fund Protfolio by Peace and State-building Goals

(Millions of U.S. dollars)