The International Monetary Fund (IMF) said it has reached a staff-level agreement with Somalia on policies to complete the fourth review under the Extended Credit Facility (ECF) arrangement.

The IMF said in a statement issued Sunday that the agreement, following discussions held between Sept. 16 and Oct. 8 led by Ran Bi, would enable the release of 30 million U.S. dollars, subject to approval by the IMF Executive Board.

"To mitigate the negative impact of foreign aid cuts and support their reform efforts, the authorities have requested an augmentation of access under the ECF arrangement of about 40 million dollars, to be disbursed in equal tranches upon completion of the fourth and fifth reviews, respectively," Bi said.

She added that the agreement, once approved, would bring total disbursements under the ECF arrangement, which was approved in December 2023, to about 100 million dollars.

The IMF noted that after a robust 4.1 percent growth in 2024, Somalia's economic prospects have weakened in 2025-2026 amid significant foreign aid cuts and adverse weather shocks.

Real GDP growth is now projected at 3 percent in 2025 and 3.3 percent in 2026, the lender said. Inflation is expected to remain stable at around 3.5 percent, although food price pressures are likely to stay elevated.

"Downside risks continue to dominate the near-term outlook, including protracted foreign aid disruptions and weather shocks, which could further worsen the economic situation," the IMF warned.

Despite the challenging environment, the IMF said Somali authorities remain committed to enhancing domestic revenue and maintaining fiscal discipline.

The preliminary 2026 budget plan envisages continued progress in domestic revenue mobilization and expenditure discipline, while accommodating additional security and election-related spending.

The plan also seeks to expand social spending using budgetary resources to mitigate the social impact of reduced foreign aid, the IMF said. "With these plans, the overall fiscal deficit in 2026 is projected to be around three-quarters of a percent of GDP," it added.

The IMF said debt and public financial management should continue to strengthen, noting that authorities are also building capacity to implement the newly completed legal framework aimed at ensuring transparency and accountability in the extractive industries.

"Key domestic revenue reforms include ongoing customs modernization and enforcement, implementation of the new income tax law, and improved enforcement of sales and income tax collection," the IMF said.