The International Monetary Fund (IMF) and World Bank have announced a significant debt relief for Somalia, following the country's successful completion of the latest phase in the Heavily Indebted Poor Countries (HIPC) Initiative. According to an IMF news release, between 2018 and 2023, Somalia managed to reduce its external debt from 64% to under 6% of its Gross Domestic Product (GDP).
The debt relief for Somalia is a collective effort by several agencies, as per the IMF’s news release. The contributions include $448.5 million from the IMF itself, $13 million from the African Development Fund, another $448.5 million from the International Development Agency, along with aid from various multilateral and bilateral creditors.
Somalia’s President H.E. Hassan Sheikh Mohamud stated in the IMF news release, "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." He added that for Somalia to progress economically, it was necessary to reform laws, systems, policies, and practices. "Reaching the HIPC Completion Point is the fruit of these reforms," Mohamud said.
According to information on the IMF’s website regarding the HIPC initiative, this program began in 1996 and was supplemented in 2005 by the Multilateral Debt Relief Initiative. To qualify for this initiative, countries must meet multiple criteria including eligibility to borrow interest-free loans from the International Development agency; they must also have a Poverty Reduction Strategy Paper and demonstrate a track record of reform and sound policies.
H.E. Bihi Iman Egeh, Somalia’s Minister of Finance echoed similar sentiments about their nation's progress. "Somalia's reform journey has been a true national process culminating in the remarkable success of determined economic reform implementation despite external challenges such as painful regular climatic shocks and the ongoing fight against international terrorism," Egeh said. He added that they were proud to have reached the HIPC Completion Point and would continue to build on these successes.