Somalia secures US$4.5 billion debt relief from IMF and World Bank
The International Monetary Fund (IMF) and the World Bank have announced a US$4.5 billion debt relief for Somalia marking a decade-long process of negotiations and reforms.
The global lenders announced in a press statement dated December 13, 2023, approving the heavily indebted Poor Countries (HIPC) initiative Completion Point for Somalia.
“Somalia’s external debt has fallen from 64 percent of GDP in 2018 to less than 6 percent of GDP by end 2023. 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 statement read.
"The World Bank and IMF will continue working together to provide the technical assistance and policy guidance the authorities need to achieve these goals,” it added.
The Global lenders including the IMF and the World Bank said this debt relief was due to Somalia’s satisfactory progress in meeting the requirements to reach the HIPC Completion Point.
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“Somalia has implemented a poverty reduction strategy for at least one year and maintained a track record of sound macroeconomic management as evidenced by the satisfactory implementation of the Extended Credit Facility (ECF) supported program. This performance was achieved despite Somalia having to face the global Covid-19 pandemic, prolonged and severe drought, a desert locust infestation, the impact of external shocks on food supply and prices, and significant security risks,” the global lenders indicated.
The World Bank Vice President for Eastern and Southern Africa, Victoria Kwakwa who was quoted by the IMF said, “Reaching the HIPC Completion Point is a historic milestone for which the Somalia Government deserves full credit.”
The debt relief granted to Somalia was given by bilateral and multilateral creditors including the IMF (US$343.2 million), International Development Association (IDA) (US$448.5 million), the African Development Fund (ADF) (US$131.0 million), multilateral creditors (US$573.1 million), and bilateral and commercial creditors (US$3.0 billion).
The Bilateral creditors include members of the Paris Club, creditors from the Arab Coordination Group, and other official bilateral creditors.
Somalia’s President, Hassan Sheikh said, “Somalia'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. We had to reform our laws, systems, policies, and practices.”
The World Bank also announced the approval of a fresh five-year Country Partnership Framework with Somalia, which centers on continuing assistance to Somalia’s development including infrastructure, jobs, and human capital. The current World Bank investment in Somalia amounts to US$2.3 billion, covering areas including human capital development, access to energy, and initiatives to address recurring climatic challenges like floods and droughts.
