Somalia receives debt relief after months of negotiations
MOGADISHU, Somalia – Somalia has been formally cleared of debt relief under improved heavily indebted poor countries [HIPC], officials said, after careful monitoring of the International Monetary Fund [IMF] and the World Bank.
For months, the nation of Horn of Africa has been running against time to embark on radical financial reforms, which have then received approval from international lenders, reports show.
And on Wednesday, both the IMF and the World Bank approved through debt relief for Somalia, making it the 37th country to reach this milestone, known as HIPC’s decision point.
The development means that Somalia’s debt will be withdrawn irrevocably from 5.2 billion in late 2018 to 557 million in present value when it reaches the HIPC completion of three years, said the World Bank.
For three decades, Somalia has struggled to establish a functioning state, with efforts always undermined by inter-clash conflicts, smuggling, Al-Shabaab threats and internal political bickering.
But debt relief would enable the country to access critical additional financial resources to strengthen the economy, improve deteriorating social conditions and create sustainable employment for Somalis.
“We welcome Somalia’s efforts to restore stability, cooperate with creditors and adopt a poverty reduction strategy,” said World Bank Group President David Malpass. “The resumption of regular funding for Somalia is an important landmark, and we look forward to promoting economic and social progress.”
Kristalina Georgieva, CEO of the IMF, who has been in the front line helping Somalia to follow, welcomed the decision and added that FGS had done a lot in a satisfactory way.
“I would like to congratulate the Somali government and the people for their intense efforts in recent years that led to this significant event,” she said.
The reforms, she noted, had laid a “foundation” for inclusive economic growth by meeting the needs of vulnerable people. She urged the FGS to continue implementing the reforms.
While noting the milestone in Somalia, she added that “I am convinced that a more resilient and successful future lies ahead of the people of Somalia.”
Prime Minister Hassan Ali Kheire and Finance Minister Abdirahman Baileh Duale have led the economic revolution in Somalia, although the government has been unable to tame Al-Shabaab’s scandalous mafia-style taxation tactics.
Mr Kheire welcomed the decision by arguing that it would allow Somalia to re-enter with international financial institutions, a move that would boost the stagnant economy.
“This decision is an important milestone that provides many opportunities for Somalia as it relentlessly follows its ongoing reform processes as well as its recovery and development agenda,” he said.
“The journey that led to this decision required hard work, dedication and partnership,” he added, praising the international lenders for “patience and resilience” during the trip.
Somalia is committed to maintaining macroeconomic stability; implement a poverty reduction strategy; and establishing a set of reforms focused on fiscal stability, improving governance and debt management, strengthening social conditions and supporting inclusive growth to reach HIPC completion.
The World Bank and the IMF will continue to work together to provide technical assistance and political guidance needed by the authorities to achieve these objectives, including in connection with the new, three-year IMF financial regime.