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International Monetary Fund. Middle East and Central Asia Dept.
Somalia continues to face drought and acute food insecurity in some areas, and the security situation remains tense as the government has stepped up its military advances against Al-Shabab. Despite these significant challenges, the authorities remain committed to the reform effort. Program performance is broadly satisfactory and the HIPC Completion Point (CP) appears achievable by 2023Q4.
International Monetary Fund. Legal Dept., International Monetary Fund. Finance Dept., and International Monetary Fund. Strategy, Policy, & Review Department
This paper provides an integrated perspective across the Trusts of the Fund. It is the first annual review that combines discussion of the adequacy of the resources of the Fund’s Poverty Reduction and Growth Trust (PRGT) and debt relief trusts, including the Catastrophe Containment and Relief Trust (CCRT), with that of the Resilience and Sustainability Trust (RST). The review of the PRGT assesses recent developments for lending demand, fundraising, and interest rates and compares them to the baseline projections underpinning the July 2021 reforms. A multi-pronged strategy is proposed to address identified strains on PRGT finances while minimizing negative effects for PRGT borrowers and preserving the confidence of PRGT lenders. On the recently established RST, this paper reports its fundraising progress; discusses demand developments and outlook for RST financing; assesses adequacy of loan resources and reserves; and examines, in view of increases in the SDR interest rate, the implications of adopting an interest rate cap at 2¼ percent for the lowest income group eligible for RST borrowing.
Chuku Chuku, Prateek Samal, Joyce Saito, Ms. Dalia S Hakura, Mr. Marcos d Chamon, Mr. Martin D. Cerisola, Guillaume Chabert, and Mr. Jeromin Zettelmeyer
There are growing concerns that 25 years after the launch of the HIPC debt relief initiative, many low-income countries are again facing high debt vulnerabilities. This paper compares debt vulnerabilities in LICs today versus those on the eve of the HIPC Initiative and examines challenges to a similarly designed debt-relief framework. While solvency and liquidity indicators in most LICs have steadily worsened in recent years, they remain substantially better on average than they were on the eve of HIPC in the mid-1990s. This said, if current trends persist, debt vulnerabilities in LICs could (but would not necessarily) reach levels comparable to the pre-HIPC era over the medium- to long-term. Today’s more complex creditor landscape makes coordination challenging. It is therefore essential for countries to reduce today’s debt burdens promptly through economic reform, lowering the cost of financing, and debt restructuring on a case-by-case basis. The international community should also step up efforts to improve debt restructuring processes, including the G20 Common Framework, to ensure that debt relief is delivered in a timely and efficient manner where it is needed.
International Monetary Fund. Middle East and Central Asia Dept.
Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
Somalia is facing a severe drought and acute food insecurity, aggravated by higher global food and fuel prices. Sustained efforts from the authorities and support from international partners are needed for immediate humanitarian assistance and to build resilience over time to climate shocks. Notwithstanding the current challenges, including a fragile security situation, the authorities continue to deliver on their commitments under the IMF supported program and have maintained the reform momentum. Program and Article IV discussions were informed by the Country Engagement Strategy.