Somalia has successfully negotiated the cancellation of $4.5 billion in debt with international lenders, marking a pivotal moment in the nation’s journey toward economic recovery.
The agreement, reached under the Group of 20 leading economies’ debt-relief initiative, kindles optimism for Somalia to attract investments and regain access to global financial markets after enduring decades of economic stagnation.
The joint statement released by the International Monetary Fund (IMF) and World Bank affirms that Somalia’s external debt is set to plummet from 42% to less than 6% of its Gross Domestic Product (GDP) by the year’s end, reshaping the country’s fiscal landscape.
Jihad Azour, the IMF’s director for the Middle East and Central Asia, lauded Somalia’s resilience, stating, “Somalia has made significant strides in rebuilding its economy and institutions after a devastating civil war.”
Referring to the attainment of the Completion Point, Azour expressed that the achievement is monumental, restoring debt sustainability and positioning Somalia for external financing that supports inclusive growth and poverty reduction.
Deputy Governor of Somalia’s central bank, Ali Yassin Sheikh Ali, sees the debt relief as a gateway for Somalia to enter debt markets and foster economic growth, signaling the end of decades of isolation from the global economy.
“It is anticipated that the completion of the debt relief process will result in economic growth for Somalia, resulting in additional jobs for Somalia and international investment,” Ali remarked in an interview.
To secure the debt cancellation, Somalia met at least 13 stringent targets, encompassing public financial management, domestic revenue mobilization, governance, and statistical reporting.
The IMF executive board granted a waiver, acknowledging the adoption and implementation of a single import duty tariff schedule at all ports.
Somali Finance Minister Bihi Egeh highlighted key reforms, emphasizing improvements in procurement processes and the streamlined payment structure for security forces and civil servants.
Over the past decade, Somalia has seen a notable increase in annual domestic revenue, reaching $345 million from $69 million, signaling a positive trajectory.
As Somalia marks the erasure of its substantial debt burden, the nation stands at the threshold of a new economic chapter, with the prospect of renewed international investments and sustainable growth on the horizon.