IMF signs agreement to non-cash assist Somalia
The Staff-Monitored Program (SMP) was approved by IMF managing director Christine Lagarde on May 16th and announced this Friday (27th) by the organization. Under the agreement, which does not entail any fund transfers, IMF staff will assist Somali authorities in steering the economy.
The aid does not involve access to cash, but helps countries with troubled economies to lay the foundation for development. In the case of Somalia, the IMF claims the North African country’s debt “is high and virtually all in arrears.” For that reason, the country has no access to external borrowing.
According to the Fund, one of the main reasons for the agreement is to prevent further arrears, as well as pursuing a “prudent” expenditure policy and seeking “realistic” pledged foreign grants as a means to boost revenues. A fiscal reform will be put in place to modernize tax and customs administration, and budget planning and execution.
These measures will be achieved through maintaining a floor on the central bank net foreign assets, initiating the first stage of comprehensive currency reform, strengthening banking system regulation, enhancing the anti-money-laundering framework and combating the financing of terrorism.
The SMP provides for assistance to Somalia from May 2016 to April 2017. Other similar partnerships will be implemented in years to come, so the country may regain access to external credit. ■