IMF reaches deal to monitor program for Somalia

The International Monetary Fund (IMF) said it has reached an agreement with Somalia to a 12-month monitoring program starting in May, marking the move toward normalizing ties with global financial institutions.

The IMF said in a statement received on Thursday that the staff-monitored program (STP), which does not involve loans or financial support will focus on policies to improve governance and fiscal management, strengthen institutions, foster financial sector development, and fill considerable data gaps.

"The program envisages reforms to raise domestic revenue and improve budget preparation and execution," IMF mission chief Rogerio Zandamela said in a statement.

Zandamela emphasized 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.

"To support financial sector development, the program will initiate a comprehensive currency reform, and strengthen licensing, supervision and regulation of commercial banks and money transfer businesses," the statement said.

The Horn of Africa nation has not been in the mainstream international business since early 1990s when the central administration there collapsed; giving way to a civil war that has nearly ended following the intervention of the African Union through the African Union Mission in Somalia (AMISOM).

Analysts say the Horn of Africa nation has steadily improved security which has enhanced investor confidence, including those seeking contracts in reconstruction in a country where infrastructure has been reduced to a bare minimum by over 20 years of war.

The IMF said technical assistance and capacity building will be an integral part of the program. "The SMP will be submitted to IMF management for its consideration in April/May," it said.

The fund said it will continue to support institutional and capacity building through the IMF multi-donor trust fund, noting that the success of the SMP will hinge on continued support of the international community.

The Horn of Africa nation is considered a virgin investment market usually characterized by high levels of return on investment, raising the appetite for regional investors.

Zandamela who visited Nairobi from March 30 to April 5 to discuss the program with the Somali authorities said Somalia has embarked on an ambitious process of rebuilding the state and the economic and social infrastructure since 2012.

He said although much progress has been made, the security situation remains difficult and institutions and governance capacities need to be rebuilt, adding that considerable development efforts are essential for the reconstruction of Somalia.

"Despite the difficult socioeconomic conditions, recent efforts by the Federal Government of Somalia (FGS) are bearing fruit," Zandamela said.

According to IMF, economic growth in 2015 was estimated at 3.7 percent and inflation at one percent. 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 government is committed to addressing the difficult challenges the country faces. It is embarking on policies and reforms to improve economic governance, strengthen the fiscal framework, and rebuild the financial system," Zandamela said. Endit