The Somalia government has asked the International Monetary Fund to delay its cut-off deadline on a key credit facility after the country failed to conduct elections on time.
Finance Minister Abdirahman Duale Beileh and Governor of the Somali Central Bank Abdirahman Mohamed Abdullahi asked the IMF to extend the deadline by three months to August 17.
The officials cite the elections, due to be held on May 15, as a critical point of transition that would likely bring in a new administration, which may need time to assess policy outlooks.
The deadline by IMF expires two days after presidential elections.
“In view of the automatic expiration of the ECF (extended credit facility) engagement on May 17, we hereby request a delay of three months,” they wrote in a letter dated April 28 to IMF managing director Kristalina Georgieva.
“The additional three months will provide enough time for the new administration to confirm the policies, reform agenda and conditionality that will underpin the ECF programme for the next 12 months.”
On March 25, 2020, Somalia was granted the ECF, which the IMF Board routinely approves for countries with protracted balance of payments problems. It is meant to support low-income countries, especially those emerging from conflict but are heavily indebted.
The programme was part of the Heavily Indebted Poor Countries (HIPC) Initiative, which would cut the country’s debt to $557 million from $5.2 billion, as long as it completed certain reforms including taming corruption, raising local revenues and passing laws on good governance.
The reforms also included holding timely elections.
Somalia would also gain from the three-year $395.5 million in financial assistance to help implement the reforms.
But as the elections, initially planned for March 2021, have dragged on, the IMF, in March this year, said it could terminate the programme.
“”Timely resolution of the political uncertainty and successful completion of elections is critical to avert the automatic lapse of the IMF-supported programme,” the IMF said in a statement.
The Fund said lack of a proper government could risk the country’s budgetary support from the IMF and delay debt relief programmes.
Mr Beileh and Mr Abdirahman say the electoral cycle means further IMF reviews can only happen after elections.
“Despite multiple challenges, including Covid-19 and climate shocks, we remain steadfast in our commitment to the programme and have continued to deliver on reform commitments,” they said.
“In the face of significant revenue shortfalls in 2021 and 2022, we intensified expenditure prioritisation and financed the deficit with past savings and prudent use of the SDR [special drawing rights] allocation.”
Somalia says it also improved revenue administration reforms, public financial management, and debt management.
“We made progress on promoting financial stability and development. We also continue our governance and anticorruption efforts.”