Major Relief for Somalia as it Secures $4.5 Billion Debt Cancellation

GOOBJOOG NEWS | NEW YORK: Somalia’s quest to achieve the much needed debt relief was achieved Tuesday after the approval by the International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA).

This was approved under the Heavily Indebted Poor Countries (HIPC) Initiative Completion Point bringing substantial debt relief for Somalia, amounting to US$4.5 billion

The move now significantly reduces Somalia’s external debt from 64% of GDP in 2018 to under 6% by the end of 2023 and will have a positive impact on the country’s economy which will see reduction in poverty levels, job creation and general development of the country.

The debt relief is sourced from various creditors, including the IMF (US$343.2 million), IDA (US$448.5 million), African Development Fund (ADF) (US$131.0 million), other multilateral creditors (US$573.1 million), and bilateral and commercial creditors (US$3.0 billion). This collective effort underscores the global commitment to aiding Somalia’s economic recovery.

This achievement is a result of comprehensive reforms in laws, systems, policies, and practices put in place by the Federal Government of Somalia steered by President Hassan Sheikh Mohamud which say the achievement of the HIPC Completion Point.

President Mohamud emphasized the long-term national commitment and cross-governmental efforts over nearly a decade, spanning three political administrations.

On his part, Finance Minister Bihi Iman Egeh highlighted the nation’s journey of economic reform and resilience, maintaining progress amidst challenges like climatic shocks and the fight against international terrorism.

The reforms led to increased domestic revenue, strengthened public financial management, and enhanced institutional capacity.

IMF and the World Bank directors acknowledged Somalia’s satisfactory progress in meeting the HIPC Completion Point requirements, which includes implementing a poverty reduction strategy and maintaining sound macroeconomic management, evidenced by the Extended Credit Facility (ECF) supported program.

Somalia’s performance is notable given the challenges posed by the Covid-19 pandemic, droughts, locust infestations, food supply issues, and security risks.