The World Bank and International Monetary Fund(IMF) are ready to partially cancel debt owed by Somalia, a move that will allow the war-torn country to rebuild after years of conflict.
Somalia’s public debt is estimated to be more than US$5.2 billion. After debt relief mechanisms are applied, this figure will reduce to US$3.7 billion.
Additional debt relief under the enhanced Heavily Indebted Poor Countries(HIPC) Initiative is estimated at US$2.1 billion.
The IMF Executive Board has already approved interim debt relief plan and is awaiting decisions by other multilateral and bilateral donors.
Paris Club Creditors, made up of the US, Russia, Italy, and France is expected to make a decision on Somalia’s debt at the end of March 2020.
According to the World Bank and IMF, Somalia has taken the necessary steps to begin receiving debt relief and could be ready for the HIPC program in about three years time.
The horn of Africa nation has been battling terrorist groups within its borders and has been blacklisted by international financial institutions for the past 30 years.
A fresh engagement with the international community is expected to re-open Somalia’s access to financial resources. The country needs funds to rebuild its infrastructure and social structures, create employment and pull millions out of abject poverty.
“We welcome Somalia’s efforts to restore stability, engage with creditors, and adopt a poverty reduction strategy,” said World Bank Group President David Malpass.
“Resumption of regular financing to Somalia is an important landmark, and we look forward to further economic and social progress,” he added.
“I would like to congratulate the Somali government and people for their intense efforts over the past years leading to this momentous event,” said Kristalina Georgieva, IMF Managing Director.