The International Monetary Fund (IMF) and the International Development Association (IDA) of the World Bank have jointly announced the approval of a debt relief package totaling $4.5 billion for Somalia. This relief comes under the Heavily Indebted Poor Countries Initiative (HIPC).
Various sources, including the IMF, the African Development Fund, other multilateral creditors, and bilateral and commercial creditors, have contributed to providing debt service relief. This significant initiative aims to support Somalia’s economic reforms and alleviate the burden of its debt.
IMF Managing Director Kristalina Georgieva praised Somalia’s commitment to economic reforms and affirmed the organization’s ongoing partnership with the country. President Hassan Sheikh Mohamud of Somalia expressed gratitude for the debt relief, acknowledging the nearly decade-long collaborative effort across multiple administrations in prioritizing this crucial agenda.
The Heavily Indebted Poor Countries Initiative was established to create a framework enabling all creditors, including multilateral entities, to provide debt relief to the world’s poorest and most heavily indebted countries. The goal is to ensure debt sustainability, reduce constraints on economic growth, and alleviate the burden of unsustainable debt service.
Somalia’s successful completion of the HIPC Initiative marks a significant milestone, making it the 37th country to reach Completion Point under the program. The debt relief has had a substantial impact, with Somalia’s external debt decreasing from 64% of GDP in 2018 to less than 6% of GDP by the end of 2023.
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