Somalia is to benefit from a $4.5 billion debt reduction plan with international creditors to service its debt, the International Monetary Fund (IMF) announced in a statement on Wednesday.
“Somalia’s debt relief process is the result of intergovernmental efforts spanning three political administrations for nearly a decade. It is a testament to our national commitment and the priority given to this crucial and promising programme”, Somali President Hassan Sheikh Mohamoud said in the statement.
This debt relief for Somalia was approved on Wednesday by the Executive Boards of the IMF and the International Development Association (IDA), the World Bank agency that lends to the poorest countries. It was carried out under the Heavily Indebted Poor Countries (HIPC) Initiative.
Debt service reduction (or interest on these loans) was provided by the IMF to the tune of $343.2 million, IDA to the tune of $448.5 million, and the African Development Fund (ADF) to the tune of $131 million.
Other multilateral creditors contributed $573.1 million, and bilateral creditors and agencies, such as members of the Paris Club, contributed $3 billion.
The IMF and the other institutions state that they have “determined that Somalia has made satisfactory progress towards meeting the requirements necessary to reach the HIPC completion point”.
The IMF added that Somalia had been implementing a poverty reduction strategy for at least a year and had maintained good macroeconomic management. Somalia, a country in the Horn of Africa with a population of around 17 million, has had to cope with torrential rains caused by the El Nino weather phenomenon since the beginning of October, displacing at least one million people and killing more than 100.
The country has also had to cope with several episodes of historic drought in recent years, which have decimated livestock. Since 2007, Somalia has also been confronted with an insurgency by the radical Islamists Shebab, a group affiliated with Al Qaeda. After some notable progress, the offensive launched by the Somali authorities has stalled in recent months.