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EXPLAINER: Somalia reaches the Decision Point, what does it mean?

Storyline:Business, National News

By T. Roble

Somalia has reached the Decision Point under a World Bank/IMF debt relief scheme enabling the Horn of Africa nation to receive interim relief on its debt, Prime Minister Hassan Khaire.

The PM said in a tweet Tuesday the IMF had reached agreement that Somalia had now met all the requirements to reach this stage.

“Extremely grateful to my colleague & friend @KGeorgieva Appreciate her taking the time to call me at the conclusion of the IMF board meeting on #Somalia confirming the news that we have all been waiting for, Somalia has reached Decision Point subject to executions tomorrow,” the PM said.

The announcement follows the clearance of $122 million arrears to the African Development Bank by the UK and European Union Tuesday. This also followed a clearance of arrears owed to the World Bank this month. Norway paid off the $366m arrears to the World Bank while the IMF said it had secured the commitment of 100 of its members to clear Somalia’s arrears.

What does Decision Point mean?

The decision point is a stage under the Highly Indebted Poor Countries (HIPC) initiative launched in 1996. To reach the Decision Point, country seeking debt relief must meet the following requirements:

  • Establish a track record of macroeconomic stability
  • Prepare an Interim Poverty Reduction Strategy Paper- Somalia converted the National Development Plan 9 as an ISRP. This must be done through a participatory process.
  • Clear or reach an agreement on a process to clear the outstanding arrears to multilateral creditors- Somalia has since cleared arrears to African Development Bank and World and has reached a deal on clearance of IMF arrears.

Somalia has also successfully gone through the three IMF Monitored Staff Programme and currently on the fourth one known as the Upper Credit Tranche (UCT).

Reaching the Decision Point now means Somalia can normalize relations with International Financial Institutions such as IMF, World Bank and AfDB thus unlocking access to limited credit.

The next step is the Completion Point which will most likely be reached in 2021/22. This requires Somalia to adopt and implement the IRPS for at least one year and satisfactorily implement all reforms agreed at the Decision Point.