The World Bank and the International Monetary Fund on Thursday said they had taken a next historic step toward forgiveness of Somalia’s $5.3 billion in debt, with a final decision possible by the end of March.
The Executive Boards of the International Monetary Fund (IMF) and World Bank agreed at their respective meetings on Feb. 12 and 13 that the East African country is eligible for assistance under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, based on a preliminary assessment.
“This assessment is an important step towards forgiveness of most of Somalia’s debt, which measured $5.3 billion at the end of 2018,” the two institutions said in a joint statement.
Somali Finance Minister Abdirahman Beileh welcomed the news and said Somalia would press on with its reforms.
“It’s indeed a historic moment,” Beileh said on Twitter. “Proud day. We remain committed to reforms & sustainable development.”
Beileh in October told Reuters his country would press ahead with poverty reduction efforts and a major regional ports and corridors initiative if the debt forgiveness process continued as expected.
IMF Managing Director Kristalina Georgieva said this week’s decisions provided “a clear recognition of Somalia’s sustained commitment to key economic and financial reforms” under challenging circumstances.
“Helping Somalia achieve debt relief and unlock access to the needed resources to increase growth and reduce poverty is a key priority for the IMF,” she said in the joint statement.
Next, Somali authorities must either clear their arrears to multilateral creditors or agree a strategy to clear them, and finalize an agreement on reforms it will implement.
World Bank staff expect to present the operation for clearing the arrears to the International Development Association (IDA) by the end of February 2020.
“Prompt action on these items could result in Somalia reaching the Decision Point by the end of March 2020,” the IMF and World Bank said in the statement.
Somali officials said they expected to sign a debt relief package with World Bank on Feb. 27, followed by agreements with the African Development Bank and the IMF.
Once all the conditions are met, Somalia will be eligible for debt relief under the Multilateral Debt Relief Initiative (MDRI) from the World Bank’s IDA and the African Development Fund (AfDF), together with fresh assistance from the IMF.
Paris Club creditors are also expected to provide further beyond-HIPC assistance, the IMF and World Bank said. (Reporting by Andrea Shalal Editing by Chizu Nomiyama and David Gregorio)