The IMF and World Bank consider Somalia eligible for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
The announcement came after executive boards of the International Monetary Fund (IMF) and World Bank held meetings on February 12 and 13 respectively.
The HIPC framework enables provision of debt relief to world poorest and heavily indebted nations with the intention to reduce constraints on economic growth. The debt service burden slows down poverty reduction in these countries.
Through the program, Somalia may see forgiveness of its debt, estimated at $5.3 billion.
However, Somalia’s perfomance under the current IMF Staff-Monitored Program (SMP) will need to be confirmed as satisfactory to complete the journey to the HIPC decision point.
Furthermore, the authorities will need to either clear their arrears to multilateral creditors or agree a strategy to clear them. In this case, World Bank staff expect to present the operation for clearing the arrears to the International Development Association (IDA) by the end of February 2020.
In addition, Somalia will need to finalize on the necessary reforms to reach completion point.
The World Bank says that prompt implementation of these items may see Somalia reaching the decision point by end of March 2020.
Upon reaching the completion point, Somalia will qualify for unconditional debt releif under the HIPC intiative. In addition, Somalia will receive debt relief under the Multilateral Debt Relief Initiative (MDRI) from World Bank’s IDA and the African Development Fund (AfDF)together with beyond-HIPC assistance from IMF.
To date, 36 countries have reached both their Decision Points and Completion Points under the Enhanced HIPC initiative.
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