On Wednesday, the International Monetary Fund (IMF) announced that it has reached a staff-level agreement with Somalia, clearing the path for the release of a 100-million-U.S.-dollar loan.
According to the IMF, the agreement pertains to economic policies and reforms to be supported by a new 36-month Extended Credit Facility (ECF) arrangement and is subject to approval by the IMF's executive board.
Laura Jaramillo, the IMF mission chief, noted that Somalia has made significant progress in rebuilding its economy and institutions since 2020 under the current ECF-supported program.
"Somalia has consistently implemented a wide range of reforms to strengthen key economic and financial policy institutions," Jaramillo said.
She also stated that this progress is positioning Somalia to reach the Heavily Indebted Poor Countries Completion Point in December, at which point Somalia is expected to receive debt relief and move towards fully normalizing relations with its key creditors.
However, Jaramillo acknowledged that despite the progress achieved, Somalia faces significant challenges in various areas, including economic, social, security and climate risks.
According to official data, in 2022, an estimated 54 percent of the population was living on less than 2.06 dollars per day, a growth rate she said is currently insufficient to reduce widespread poverty, address large social needs and create enough jobs for the youth.
Moreover, the IMF pointed out that Somalia is highly vulnerable to climate shocks that impede growth and hinder poverty reduction efforts.
According to Jaramillo, it is against these challenges that Somalia has requested a new three-year IMF-supported program under the ECF.
"The program and the related capacity development support will help Somalia further strengthen key economic institutions and promote macroeconomic stability and growth, in alignment with Somalia's national development plan and the government's long-term vision," she said.