Somalia to access $100m IMF budget support as it completes ‘historic’ debt relief process next month

GOOBJOOG NEWS| MOGADISHU: Somalia will benefit from an additional $100 million credit facility from the IMF in the next three years as it completes the debt relief process by next month, marking a ‘historic moment’ for the Horn of Africa nation which has struggled with billions of external debts for decades.

An IMF staff-level statement on Wednesday noted that the global lender had reached a deal with the Somali authorities for $100 million in budget support under the Extended Credit Facility programme. This is the second three-year extension of the ECF support programme from the IMF. In 2020, the IMF approved a US$395.5 million credit facility to Somalia.

In the statement Wednesday, the IMF said Somalia was on course to reach the Completion Point under the Heavily Indebted Poor Countries (HIPC) initiative. This will mark the end of the debt relief process, allowing Somalia to access more loans and concessions from International Financial Institutions (IFCs).

IMF team leader Laura Jaramillo hailed Somalia’s reform process. “Somalia has made considerable progress in rebuilding its economy and institutions. Under the current ECF-supported program, in place since in 2020, Somalia has maintained strong implementation of wide-ranging reforms to help strengthen key economic and financial policy institutions.’

The IMF team said the ECF program and the related capacity development support will help Somalia further strengthen key economic institutions and promote macroeconomic stability and growth, in line with Somalia’s national development plan and the government’s long-term vision.

Finance Minister Bihi Egeh said the expected completion of the debt relief process was a major leap for Somalia in three decades. “We have reached an important and historic agreement with the IMF on the way forward after we achieve debt relief in December 2023. After over 30 years, Somalia will finally normalise relations with the International Financial Institutions.”

Despite the bullish situation, IMF said continues to face including those stemming from economic, social, security, and climate risks. In 2022, the lender said, an estimated 54 percent of the population was living on less than US$ 2.06 per day. Growth is currently insufficient to reduce widespread poverty, address large social needs, and create sufficient jobs for the youth. Somalia is highly vulnerable to climate shocks that hurt growth and hinder poverty reduction efforts.