Tuesday March 11, 2025
By Liban Obsiye
On 13th December 2024, Somalia reached the Highly Indebted Poor Countries Initiative (HIPC) Completion Point to attain debt relief from the major creditors including the World Bank, African Development Bank and International Monetary Fund (IMF). This was a historic moment which showcased the Somali governments capacity to consistently deliver reforms in the most challenging circumstances and unchain its people from over 4.5 billion US Dollars of unsustainable debt. This was even more remarkable as the Somali authorities achieved this in amidst an active campaign against international terrorism in the form of Al-Shabaab, one of Al-Qaeda’s most dangerous affiliates globally. Moreover, alongside the economic reform program, Somalia was undergoing a period of political reflection and negotiations, which continues today, on its state formation process.
There’s a great amount written about the unpopularity and subsequent difficult results of IMF program conditionalities across the world but Somalia’s experience to date has been positive.
Somalia formed its first internationally recognized government after decades of conflict and ineffective and weak provisional administrations in 2012 when Dr. Hassan Sheikh Mohamud was elected in his first term of office. This ushered in a new period of political reconciliation, stability and hope. Following this, the Somali Federal government focused on institution building through the restoration of the Central Bank, strengthening of public financial management systems, capacity building of civil servants and rebuilding the Somali security apparatus to combat the scourge of international terrorism at home.
Somalia’s re-engagement with the IMF resumed in 2015 after a long period of suspension following the civil war in 1991. After this point Somalia’s first Staff Monitored Program was agreed. The initiation of this debt relief roadmap and the engagement with the IMF allowed for the identification and consolidation of key economic and fiscal reform priorities and brought greater focus and discipline to the nascent Somali government systems and processes.
The factors that affected Somalia’s program success with the IMF were many but the most important of this was absolute and honest commitment from both the Somali government and the IMF staff working with them. In all matters of reform of any nature anywhere, it is fundamental that there is genuine common understanding of where things are, how they can be improved and who is responsible for implementing what.
On its part, the Somali government was committed to the reform program because it saw it as its own. This national ownership and responsibility were felt very deeply across the Somali government, lawmakers and public because the program was designed in a strategic manner to respond to Somalia’s macro-economic, fiscal, public financial management and governance needs and priorities to re-join the international financial architecture from which it was absent from for the best part of almost 3 decades. It was also sequenced in a way that interlocked reform impacts and ensured successful implementation to incrementally build public confidence in the government institutions and actions. Furthermore, there was already an element of collective frustration with the status quo and global financial pariah status by all Somali stakeholders, including the long-suffering business community which had limited access to external capital for investment and growth unlike their counterparts in the Horn of Africa and the wider African continent.
Somalia’s contribution to promoting the global discourse on national ownership of reforms through the g7+ and in multiple forums won it much respect and admiration from international partners who were encouraged by the enormous level of national commitment and investment from the Somali government and people on transforming their future.
In addition to the above, there was effectively targeted strategic communication from the beginning which created a national reform narrative championed by the government, media, civil society and international partners and informed by public dialogue and debate on the IMF benchmarks and their purpose and impact. This narrative simultaneously engaged all key audiences including the Somali public, business community and international partners. Today, the reforms have become a source of national and international pride and above day-to-day politicking given the successful debt relief outcomes. This consensus on the reforms was, and remains, a huge achievement in Somalia’s highly contested politicised governance ecosystem and supports the implementation of the new 3-Year IMF successor program which the authorities are engaged in today.
Another factor that really matters in the successful delivery of IMF Supported Programs in fragile states like Somalia is the provision of technical assistance and a flexible and understanding approach from the IMF. Contrary to existing criticism of the IMF as dishing out the same medicine of public austerity to all borrowers from its concrete Washington DC base, this program with Somalia was treated with the unique care it required and deserved. In fact, in the last two decades, the IMF has made great effort to better understand and work with fragile states based on their circumstances rather than enforce a one size fits all approach. Furthermore, there is a new approach from all International Financial Institutions that is guided by the timely idea that economic reforms and macroeconomic stability are global public goods rather than just individual state problems and priorities. This new holistic burden sharing approach is more useful and realistic given the devastating impact of external shocks like climate change and conflict and the consequent higher levels of sovereign indebtedness and low growth of most developing nations today which in some cases are spending more on climate response than education and healthcare despite been among the least emitters of Green House Gases in the world.
In addition to the above, there were also regular virtual and in-person program reviews which helped to smoothen the implementation process. The fact is that all nations are unique in their history, challenges and opportunities and most require capacity building and support with strengthening key economic institutions to successfully deliver reforms and the IMF continues to deliver on this in Somalia.
The IMF Somalia Country Fund, kindly financed by various supportive donors, provided vital and much needed expert technical assistance for core Somali institutions including the Ministry of Finance and Central Bank to improve budgeting, economic analysis, fiscal reporting, statistics, financial sector regulations and maintaining macroeconomic stability. Furthermore, other supportive international partners including the World Bank, African Development Bank, European Union and its member states, the United Kingdom and the USA focused their Technical Assistance support on helping to deliver on the reforms, build climate resilience and increase social sector investments. This helped to deepen understanding and accelerate the wider economic reform implementation while aiding basic public service delivery in education and healthcare.
Political fragmentation was always a major cause of Somalia’s instability since the collapse of the state in 1991. This is the same in all fragile states today. Yet, the economic reform program with the IMF became a fundamental part of the state building process which created unity across the political divide. The commitment to de-politicise the reforms to start tackling multi-dimensional poverty, create jobs and address the nations unsustainable debts was a landmark achievement which continues today with a refocused lens on economic growth post debt relief. This political maturity and economic foresight would have arguably not been so strong in Somalia’s fragmented political process without the constant risk of failing to relief the nation of over $4 billion Dollars of unsustainable suffocating debt.
In conclusion, IMF Supported Programs will only be as effective and successful as both governments and the IMF partnership allows. Political commitment, national ownership, and open, accountable, and mutually reinforcing working relations are at the centre of making IMF-supported programs work in any country. Additionally, it is fundamental for both the government and IMF to consider compensatory actions to mitigate measures that can offset the difficult effects of some reforms to maintain public support and implementation success. This is Somalia’s experience and I hope many other nations in similar situations, including those in the g7+, can learn from this.
Liban Obsiye is the Executive Director of Somalia’s National Climate Fund. He also serves as the Senior Adviser to the Minister of Finance. Previously, he was the Chief Policy Coordinator and Head of the Strategic Economic Unit at the Ministry of Finance of Somalia.