Somalia to Complete Debt Relief Process in December, IMF Says

GOOBJOG NEWS | MOGADISHU: Somalia’s external debt will drop to a historic low of $600 million by the end of this year as the Horn of Africa nation reaches the final phase of the debt relief process, the IMF has said.

The IMF said Friday that Somalia is on course to reach the Completion point under the Highly Indebted Poor Countries (HIPC) initiative by December this year raising positive prospects for the resumption of relations with International Financial Institutions (IFCs).

In 2021 when Somalia reached the Decision Point, the IMF projected that Somalia would be marking the Completion Point by June 2024 but significant reforms in government including robust domestic revenues have yielded an earlier milestone. In 2018, Somalia’s external debt stood at $5.2 billion.

“Despite these challenges, the Somali authorities have continued to make progress in implementing the ECF-supported program and are working toward achieving the HIPC Completion Point (CP) in December 2023,” IMF team leader Laura Jaramillo said following the completion of the fifth review.

The IMF noted that as of July 2023, signed debt relief agreements represent 76.8 percent of the net present value of debt after traditional debt relief, including all Paris Club creditors, the Kuwait Fund for Arab Economic Development, and the Saudi Fund for Development

The lender further noted that Somalia’s economic growth in 2023 is forecast at around 2.8% while inflation at 5.7%/ it further sounded up beat about Somalia’s domestic revenue generation noting that in 2024, it will cover the cost of employee compensation.

However, the Bretton Woods institution said Somalia still faced significant challenges especially in light of unpredictable climatic patterns. Despite the resumption of rainfall in the first quarter of 2023, IMF said, economic activity has been weighed down by the lingering effects of drought, recent floods, and subdued remittances. Food insecurity remains a concern and the security situation is challenging in some parts of the country.