Announcement of the Consultative Group for Somalia on November 6, 1985

FOR IMMEDIATE RELEASE World Bank I ERNATIOl;AL MO"ETARY FUND JOINT u::r,.".Il'i 1818 H Street, N.W ., Washington , D.C. 20433 , U.S.A.• Telephone: (202 ) 477 -1234 \'.' :.~!il:lGTON, D C 204:il BANK PRESS RELEASE November 6, 1985 MEETING OF THE CONSULTATIVE GROUP FOR SOMALIA A meeting of the Consultative Group for Somalia took place in Paris on November 5 and 6, 1985, to consider Somalia's economic and financial situation, its national development strategy and program, and its needs for external assistance. Representatives of 21 countries and institutions met under the Chairmanship of Mr. Michael H. Wiehen, Director, Programs Department, Eastern and Southern Africa Region, The World Bank. The Somali delegation was led by His Excellency Dr. Mohamed Sheikh Osman, Minister of Finance, and included His Excellency Mr. Ahmed Habib Ahmed, Minister of Juba Valley Development, His Excellency the Vice Minister of Agriculture Dr. Mohamoud Abdi Nur, and the Governor of the Central Bank, His Excellency Dr. Omar Ahmed Omar, and several senior Government officials. · Since the first meeting of the Consultative Group for Somalia in late 1983, the Somali economy has come under increasing pressure as a result of the 1983 drought, loss of its most important cattle export market and temporary slackening of its adjustment effort in 1984. Early in 1985 the Government instituted a number of bold steps in its renewed effort to adjust and stabilize its economy. It introduced a market determined exchange rate for most private transactions, it virtually abandoned price controls and trade restrictions, it initiated studies on the reform of the public enterprise sector and initiated a set of actions to stimulate the private sector. Despite these significant efforts, Somalia's economic situation continues to be precarious. The fundamental problems facing the economy - near zero domestic savings, high import dependence, slow recovery in exports, a huge debt service and low productivity of investments ari_s ing partly from deficiencies in past resource allocation and public investment/ expenditure management - persist and can only be resolved over a number of years. The members of the Consultative Group were encouraged by Somalia's determination to pursue the action programme for recovery and to reach a satisfactory understanding with the International Monetary Fund on the further steps needed to achieve a sustainable balance of payments and the resumption of economic growth. Particularly welcomed were Government indications of further steps to be taken on exchange rate management,  - 2 - restraint of demand, raising domestic resources, reform of public enterprises, support of private sector development, and improvements in training and use of technical assistance. The members of the Group welcomed the Government's strategy in the Public Investment Programme for 1986-88 as presented in the "National Development Strategy and Programme" and the efforts made to reflect realistic investment levels. Members stressed the necessity to confine the programme to those projects encompassed in the core programme, and to emphasize rehabilitation of existing capacities. The Group reviewed the requirements of aid disbursement for 1986 and concluded that about US$430 million of external assistance needed to be provided, through a combination of project aid, commodity aid, cash aid and debt relief; debt relief would have to const.itute about one-fourth of the total, and cash and commodity aid together one-third. Members indicated their continued support for Somalia's program through significant amounts of project and non-project aid for 1986 and the ensuing years, and confirmed the need for broadly based debt relief. The Consultative Group discussed as a special item the proposed Bardhere Dam project on the Juba river. The dam would provide hydro- electric power for Mogadishu, power and irrigation in the Juba valley, and flood control. Members of the Group welcomed reports that progress had been made at a recent meeting in Mogadishu on the content and timing of preparation efforts leading to formal donor appraisals, and that the World Bank had agreed at the Government's request to help raise financing for the project, subject of course to a favorable appraisal. Members stressed the need to complete preparatory work promptly and to work in parallel during the preparation and appraisal process. The meeting was attended by representatives of the Governments of Finland, France, Germany, Italy, Japan, Kuwait, Saudi Arabia, Somalia, United Kingdom and the United States, and of the African Development Bank, the Arab Fund for Economic and Social Development, the Arab Monetary Fund, the Commission of the European Communities, the International Fund for Agricultural Development, the International Monetary Fund, the Islamic Development Bank, the OPEC Fund for International Development, the United Nations Development Programme, and the World Food Programme. The Development Assistance Committee/OECD was represented as observer.