Announcement of Meeting of the Consultative Group for Somalia on April 7, 1987

- world Bank 'uropean Off,ce 66 . a\en u e d ' lena 7S11 6 PA RIS. Fra nce - Tt' l eph one4 723 54 21 PRESS RELEASE For Immed i ate Publication MEETING OF THE CONSULTATIVE GROUP FOR SOMALIA Paris, April 7 -- A meeting of the consultative Group for Somalia was held in Paris, on April 6 and 7, 1987, under the Chairmanship of Mr, Michael H. Wiehen, Director, country Programs Department, Eastern and southern Africa Region, the world Bank. The Somali delegation was led by or. Mohamed Sheikh Osman, Minister of Finance, and included or. Ahmed Habib Ahmed, Minister of Juba Valley Development, Dr, Yusuf Ali Osman, Minister of state of National Planning, or. Moha mud Abd i Noor, Vice-Minister of Agriculture, and the Governor of the central Bank, or. Omar Ah med Omar, and several senior Government officials. ; ·"' .. ' - 2 - Since the last meeting of the consJltative Group for somalia in November 1985, Somalia has made further progress towards a more liberal econo~ic system. The incentive structure has been rationalized to a considerable extent through trade liberalization, exchange rate reform, and the dismantling of agricultural pricing and marketing controls. These reforms have stimulated a recovery in production and exports, and the growth of foodgrain production in particular has been encouraging. overal l there has been some real albeit modest growth in per capita income since the last Consultative Group meeting. In spite of this substantial progress, Somalia's internal and external financial imbalances remain of high magnitude, and in several important respects the process of structural adjustment has just begun. Export earnings are still equivalent to only about 25% of imports; aggregate consumption exceeds GDP; Government revenues are equivalent to only 6-7% of GDP and are equivalent to less than one-third of total Government investment and recurrent expenditures and to about 60\ of rec urrent expenditures; and inflation, while declining from over 90% in 1984, is still excessive at the current annual rate of about 30%. In view of the magnitude of these imbalances, the Government's objec tiv es are to pursue policy and expenditure programs to reduce these imbalances in 1987 and the years ahead. The members of the Consultative Group commended the Government of somalia on the significant progress that had been made in the last two l-. l',1 • I r - 1, , _. ._, 11 ( / y - 3 - years in its efforts to adjust and stabilize t ~e ec onomy , improve revenue ni rfnrmnn ff1 nrrrf~lfl ~n,.~.~9 ~ and achieve real GDP jrowth, However, t he members stressed the need for the Government to further mobilize domestic resources; tig hten expenditure controls; ac h ieve a better balance between investment and recurrent expenditures; give priority in the allocation of resources to the social sectors, in particular human resource development and health; and to further stimulate private sector initiatives. The members of the consultative Group and the Government of somalia agreed to a planned public investment programme of us$1,025 million with a disbursement level for the three year period 1987-89 of US$720 million. Furthermore the members welcomed the Govern~ent's agreement to the creation of a Joint coordination Group to assist the Government in the coordination of the public investment program and donor disbursements. The Group reviewed the requirements for aid disbursements for 1987 and 1988, and concluded that for 1987, (net of debt relief of about US$1SO million) about us$428 million of external assistance needed to be provided, through a combination of project, commodity and cash aid. For 1988, the expected requirements of aid disbursement (net of debt relief of US$67 million) are projected at us$407 million. Members indicated their continued support for Somalia's program through significant amounts of project and non-project aid for 1987 and the ensuing years, and confirmed the nee~ -for broadly based debt rel i ef. ,• /It/;-- - 4 - The Government of Somalia reported on the progress of preparation work for the proposed Baardheere Da m project on the Juba river which would provide hydro-electric power for Mogadishu, power and irrigation in the Juba Valley, and flood control. The donors reiterated their commitment to assist the Government of Somalia in pursuing the project. The meeting was attended by representatives of the Governments of Finland, France, Federal Republic of Germany, Italy, Japan, United Kingdom and the United States, and of the African Development Bank, the Arab Fund for Economic and social Development, the Commission of the European communities, the International Fund for Agricultural Development, the International Monetary Fund, the Islamic Development Bank, the Kuwait Fund for Arab Economic Development, the Saudi Fund for Economic Development, the United Nations Development Programme, the United Nations High commissioner for Refugees, and the world Food Programme. The Development Assistance committee/OECD was represented as observer.