NAIROBI: Somalia reached the end of a debt forgiveness initiative on Wednesday overseen by the International Monetary Fund (IMF) and World Bank, unlocking $4.5 billion of debt relief from international creditors.
Reaching the “Completion Point” under the Heavily Indebted Poor Countries (HIPC) initiative is a historic milestone in the Horn of Africa country’s efforts to rejoin the international financial system after roughly 30 years outside it marked by instability and civil war.
Somalia’s debt will be reduced to less than 6% of gross domestic product by the end of this year from 64% at the end of 2018, the IMF and World Bank said in a statement.
Bilateral and commercial creditors provided $3 billion of the relief, while the World Bank, IMF and other multilateral creditors provided the rest. In July, Somalia said Russia had granted it relief on $684 million of debt.
Somalia’s President Hassan Sheikh Mohamud was quoted in the statement as saying the debt relief was the culmination of nearly a decade of effort spanning three administrations.
A senior Somali official told Reuters that now the debt relief had been sealed the government planned to mainly rely on domestic revenues for recurrent costs to avoid accumulating large debt.
The official, who did not wish to be named because they were not authorised to speak to the media, added that the World Bank and African Development Bank had allocated grants to Somalia for the next five years, which would help reduce the need to borrow.
This month the United Nations Security Council lifted a three-decade-long arms embargo on Somalia from 1992 to cut the flow of weapons to feuding warlords who had ousted dictator Mohamed Siad Barre and plunged the country into civil war.
Somalia had long asked for the arms embargo to be removed so it could do more to take on al Shabaab who have waged a brutal insurgency since 2006 to try to establish their own rule based on a strict interpretation of Sharia law.
Under Mohamud the military has achieved some of the most significant territorial gains against al Shabaab since the mid-2010s, but the continue to stage deadly attacks against military and civilian targets.