December 14, 2023

Somalia to get $4.5 bn in debt relief from creditors – IMF

Somalia to get $4.5 bn in debt relief from creditors – IMF

Somalia is set to receive debt relief of $4.5 billion from international creditors, the International Monetary Fund and World Bank announced Wednesday, as part of a debt forgiveness initiative overseen by both organizations.

The east African country is one of the poorest in the world, struggling to recover from decades of civil war, and with around 70 percent of its population living on less than $1.90 a day.

“This debt relief will facilitate access to critical additional financial resources that will help Somalia strengthen its economy, reduce poverty, and promote job creation,” the IMF said.

The green light comes as Somalia reached the “completion point” of the Heavily Indebted Poor Countries Initiative (HIPC), the fund added in a statement.

Somalia’s external debt has fallen from 64 percent of gross domestic product in 2018 to less than six percent of GDP by the end of 2023.

Debt service relief has been provided by the IMF, International Development Association, African Development Fund and other multilateral, bilateral and commercial creditors.

– ‘Significant strides’ –

The US Treasury Department added in a separate statement on Wednesday that Washington intends to cancel 100 percent of its remaining claims, “bringing the total amount of U.S. debt relief for Somalia under HIPC to around $1 billion.”

The aim is to “support Somalia as it continues rebuilding its economy,” Treasury said.

“For Somalia to move forward in the positive economic direction we all needed, we had to reform our laws, systems, policies, and practices,” said Somalia’s President Hassan Sheikh Mohamud.

He added that the country’s debt relief process has involved nearly a decade of governmental efforts spanning three political administrations.

The IMF noted that Somalia has implemented a poverty reduction strategy for at least a year, maintaining a “track record of sound macroeconomic management.”

“Somalia has made significant strides in rebuilding its economy and institutions after a devastating civil war,” said Jihad Azour, director of the IMF’s Middle East and Central Asia department.

“Maintaining sound macroeconomic policies and sustaining the reform momentum remain critical… to reap the full benefits of the debt relief.”

Vanguard News