The International Monetary Fund (IMF) and the World Bank have announced the approval of 4.5 billion U.S. dollars in debt relief for Somalia.
In a joint statement issued on Wednesday, the global lenders said the executive boards of the IMF and the World Bank’s International Development Association (IDA) “have approved the Heavily Indebted Poor Countries (HIPC) Initiative Completion Point for Somalia, which provides total debt service savings for the country of 4.5 billion US dollars.”
“Following HIPC Completion Point, Somalia’s external debt has fallen from 64 percent of GDP in 2018 to less than 6 percent of GDP by end 2023,” the statement said. “This debt relief will facilitate access to critical additional financial resources that will help Somalia strengthen its economy, reduce poverty, and promote job creation.”
It said Debt service relief has been provided by the IMF (343.2 million dollars), the IDA (448.5 million dollars), the African Development Fund (131.0 million dollars), other multilateral creditors (573.1 million dollars), as well as by bilateral and commercial creditors (3.0 billion dollars).
Bilateral creditors include members of the Paris Club, creditors from the Arab Coordination Group, and other official bilateral creditors, the statement added.
Reaching Completion Point means Somalia has implemented reforms agreed to when the country became eligible for debt relief and also fully normalized its relations with international financial institutions.
IMF Director for the Middle East and Central Asia Jihad Azour said Somalia has made important progress in rebuilding its economy and institutions after a devastating civil war.
“Reaching the HIPC Completion Point is a testament to the Somali authorities’ strong and sustained policy and reform efforts over the past years, despite numerous challenges, as well as the strong support from international partners,” the joint statement quoted Azour as saying.
He said the Completion Point is a momentous achievement that restores debt sustainability and over time offers access to new external financing to support inclusive growth and poverty reduction.
Azour said maintaining sound macroeconomic policies and sustaining the reform momentum remain critical after the Completion Point for Somalia to reap the full benefits of the debt relief.
World Bank Vice President for Eastern and Southern Africa Victoria Kwakwa said Somalia has implemented critical reforms in support of pro-poor growth, poverty reduction, better public financial management and debt management.
“Deepening structural reforms after the Completion Point will be critical to boost private sector growth and create fiscal space to invest more in human development and infrastructure in support of inclusive and resilient growth,” the statement quoted her as saying.
The World Bank and IMF said they will continue working together to provide the technical assistance and policy guidance the Somali authorities need to achieve these goals.
Somali President Hassan Sheikh Mohamud said the country’s debt relief process has been nearly a decade of cross-governmental efforts spanning three political administrations.
“This is a testament to our national commitment and prioritization of this crucial and enabling agenda,” Mohamud said, noting that for Somalia to move forward in the positive economic direction needed, they had to reform laws, systems, policies, and practices.
“Reaching the HIPC Completion Point is the fruit of these reforms. When my government committed to the reform program nearly a decade ago, this was the result we envisaged,” he added.