The International Monetary Fund (IMF) has agreed to delay the deadline, by at least three months, for Somalia’s credit facility in a move which could free up the country’s access to budgetary funding from external lenders.
The IMF, at staff level, said they had reached an agreement with the federal government on the second and third reviews of the Extended Credit Facility (ECF), a crucial privilege given to Somalia to tap into external lenders as long as the government continues with governance reforms.
This facility had been facing threats of total cut-off as IMF had given up to May 17 this year. It would have meant more revenue shortfalls. According to the IMF, failure to meet the ECF conditions, and hence a cut-off, would heighten economic risks for Somalia.
“Near-term risks include the evolution of the pandemic, prolonged drought or new climate shocks, resurgence of desert locust infestation, security risks, and additional pressures on international food and energy prices,” the lender said in a statement.
The East African reports that Somalia’s government had, two weeks ago, asked the IMF to delay its intended cut-off deadline on a key credit facility after it failed to conduct elections on time.
Somalia was on March 25, 2020 granted the Extended Credit Facility, 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 tame corruption, raise local revenues and pass laws on good governance as well as hold timely elections.
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