Somalia may increase imports by about a quarter over the next three years to support a recovering economy, the International Monetary Fund said.
By David Malingha Doya , Bloomberg - Somalia may increase imports by about a quarter over the next three years to support a recovering economy, the International Monetary Fund said.
Imports are expected to grow to $4.32 billion by 2017 from $3.48 billion last year, the Washington-based lender said in an e-mailed statement Wednesday. The increase will pile pressure on the current account deficit, adding to other “sizable challenges” that include addressing the lack of security and poor governance and instilling fiscal discipline, Rogerio Zandamela, the IMF mission chief for Somalia, said by phone.
Somalia is rebuilding an economy destroyed by more than two decades of civil war that started with the fight for control after the ousting of dictator Mohamed Siad Barre and the emergence of the al-Shabaab Islamist insurgency. An African Union military coalition has recaptured territory from al-Shabaab in recent years and senior leaders have been killed.
The country mainly exports livestock to the Gulf and imports food from neighbors. It’s ineligible to borrow from the IMF because of arrears that make up most of its $5.3 billion external debt.
Economic growth is expected to accelerate to 3.4 percent next year and 4.3 percent in 2017, compared with 2.7 percent this year, the IMF said. Growth has been held back by slowing remittances and insecurity, Zandamela said.
Expansion is set to rebound in the medium term on increased foreign investment from Somalia’s diaspora into sectors such as construction, services and telecommunications, he said. The United Nations Development Programme estimates that Somalia has one of the world’s largest diaspora groups, with 14 percent of the population living outside the country and sending home as much as $1.2 billion a year in remittances.
Donors will also continue to play an important role in the economy after providing support of more than $900 million last year, Zandamela said. Foreign-based companies keen on investing are waiting for the approval of a new constitution and solid legal guarantees before making decisions, he said.
The growth in imports is expected to result in the country’s current account gap widening to $952 million by 2017 from $644 million last year, equivalent to about 11.3 percent of gross domestic product, the IMF said.
“Even though the political and security situations remain challenging, Somalia has made tremendous progress since resuming relations with the IMF” in 2013, according to the statement released earlier.