Bulsha:- HOL has exclusively learnt that the Somali federal government has officially requested from the International Monetary Fund (IMF) to delay the review of the economic program, which was meant to be in the middle of May 2022, by three months to August 17, 2022, because of election delays.
Somalia's IMF-supported program has been affected by political uncertainty and election delays. A new government committed to Somalia's financial reform program has always seemed impossible to reach an agreement before completing the delayed elections. Because the IMF requires a three-month commitment before the evaluation can take place. Requesting an extension to the ECF program in the run-up to the review period can be seen as an admission of failure to meet the IMF's benchmarks which the Somali government agreed.
In a letter co-signed by the Minister of finance, Dr. Abdirahman Beileh, and the Governor of the Central Bank, Abdirahman Mohamed Abdullahi, the government argues that it is unable to participate in the IMF reform program review within the set deadline because "no review has been completed since November 2020 and that the ECF program is due to expire on May 17, 2022, if no review has been completed for 18 months."
For months, the federal government has kept quiet on this severe matter, hoping that the election impasse would resolve itself. Still, it has now become clear that the Somali government would not meet the deadline.
Every month, there is a $10m gap between the government revenue and its expenditure. Somalia's international partners stopped budgetary support to Somalia following delayed elections. Because of these delays, budget support grants in 2021 were only US$38 million, compared to US$170 million expected in the budget. So far, the resources provided to Somalia as part of the IMF's 2021 SDR allocation (SDR157 million) have been compensating for this revenue shortfall, but these resources will run out in a few months unless budget support is disbursed.
Government insiders have informed HOL that the extension request is not automatic as the IMF managing executive Board, the most senior governing body, has to approve. Additionally, all countries going through the reform program are expected to meet the deadlines set by the IMF and only allowed one exceptional request for extension through the reform program. It will be for the IMF leadership to now decide whether election delays can constitute a valid justification for an extension request.
Development financial experts HOL spoke to have said that Somalia has taken a very risky road by requesting the extension. The continuously delayed election will not inspire confidence from Somalia's partners and international financial institutions for the country to successfully conclude the program of reform.
"Somalia had no choice but to ask for an extension because the mid-may deadline would not be met. Whatever happens, despite all of Somalia's reform progress, the delayed elections and the openly corrupted way the election process took place, Somalia's debt-relief and economic reform program are in serious trouble," said an international economic analyst HOL contacted who did not wish to be named.
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