On June 20, the management of the IMF completed the second and final review under the second 12-month Staff-Monitored Program (SMP II) with Somalia, and the Managing Director of the IMF approved a third 12-month SMP (SMP III) covering the period May 2018–April 2019. The SMPs for Somalia are designed to help maintain macroeconomic stability, rebuild key economic institutions, and build track record on policy and reform implementation.

 Recent developments are broadly favorable despite difficult political and security environment. Economic activity is rebounding from the effects of the drought in 2017. Reflecting a strong rainy season, sustained remittances and grant inflows, growth in 2018 is projected to increase to 3.1 percent from an estimated 2.3 percent in 2017, and inflation is expected to ease to under 3 percent from about 5.1 in 2017.

 Reflecting ongoing reforms, the fiscal position has improved since December 2017. The Federal Government of Somalia (FGS) recorded a small fiscal surplus in 2017 as a result of higher-than-programmed domestic revenue mobilization and budgetary grant disbursements. The strong fiscal performance continued through March 2018 due, in part, to lower-than-projected expenditure and slightly higher domestic revenue.

 SMP III will build on achievements under the previous two SMPs and will continue to lay the foundation so that Somalia will eventually have a SMP that meets the IMF Upper Credit Tranche (UCT) conditionality which is one of the key requirements for Somalia to reach the Decision Point under the Heavily Indebted Poor Countries (HIPC) initiative. SMP III will focus on broadening and deepening reform implementation to maintain macroeconomic stability and to continue rebuilding institutions and capacity to improve macroeconomic management and governance.

 IMF Press Release: https://www.imf.org/en/News/Articles/2018/05/15/pr18174-somalia-imf-staff-completes-review-visit-and-reaches-staff-level-agreement