Somalia is expected to benefit from substantial debt relief

Somalia is anticipated to achieve substantial debt relief this week, marking a historic moment that is anticipated to slash its debt-to-GDP ratio to less than 6%. This development, facilitated through the World Bank and International Monetary Fund’s (IMF) Heavily Indebted Poor Countries (HIPC) Initiative, holds significant implications for Somalia’s reintegration into the international financial system after nearly three decades.

As outlined in an IMF media advisory on Monday, Somalia is on track to reach the “Completion Point” under the HIPC initiative on December 13, representing a pivotal milestone in its development trajectory. The World Bank’s executive board is expected to grant approval on Tuesday, followed by the IMF’s board on Wednesday.

Upon receiving these approvals, Somalia is slated to benefit from substantial debt relief, leading to a reduction in its external debt from approximately 64% of GDP at the end of 2018 to less than 6% at the close of 2023, according to the advisory. Earlier this month, the United Nations Security Council lifted a longstanding arms embargo on Somalia, which had been in effect for thirty years to curtail the influx of weapons during a civil war.

The agreement between Somalia and the IMF in November paved the way for a 36-month Extended Credit Facility loan of about $100 million. Furthermore, in July, Somalia reported that Russia had granted relief on $684 million of debt, playing a significant role in the overall debt forgiveness process.