Somalia Receives $4.5 Billion Debt Relief from IMF and World Bank

Somalia has welcomed a significant financial boost with the announcement of a $4.5 billion debt relief package from international creditors, including the International Monetary Fund (IMF) and the World Bank. The IMF, in a statement on Tuesday, highlighted Somalia’s eligibility for relief, citing the country’s implementation of a poverty reduction strategy over the past year and a consistent track record of sound macroeconomic management. This development follows Somalia’s successful attainment of the “completion point” under the Heavily Indebted Poor Countries Initiative (HIPC).
Somalis on the streets of Mogadishu expressed optimism about the positive impact of the debt relief on the country’s economy. Ibrahim Hassan Abdi, a money changer, conveyed his happiness, anticipating an improvement in the economy and a relief from the burden of debt. Another resident, Ali Abdi, shared the sentiment, emphasizing that Somalia could now issue its own currency, fostering economic growth and enabling infrastructural development like constructing a new airport.
The United States Treasury Department affirmed its commitment to supporting Somalia’s economic recovery by canceling 100 percent of its remaining claims, contributing around $1 billion in debt relief under HIPC. The goal is to assist Somalia in rebuilding its economy, according to the Treasury statement issued on Wednesday.
Somalia’s President Hassan Sheikh Mohamud acknowledged the country’s significant strides in economic reform, emphasizing that a decade of governmental efforts spanning three political administrations led to the successful debt relief process. Abdulkadir Mohamed Roble, a market vendor in central Mogadishu, expressed satisfaction with the relief, emphasizing the need for a new functional banknote to revitalize Somalia’s currency and promote global acceptance.
Over the years, Somalia has grappled with the aftermath of civil war, and approximately 70 percent of its population lives on less than $1.90 a day, according to the World Bank. The reduction of Somalia’s external debt from 64 percent of GDP in 2018 to less than six percent by the end of 2023 marks a crucial step in the nation’s ongoing efforts to recover and develop its economy.