By T. Roble
The Paris Club creditors which control 53% of Somalia’s external debt have agreed to cancel $1.4 billion of the debt and reschedule the balance to 2024 in a major boost for the country’s journey towards complete debt relief.
The Creditors which Somalia owes $2.7 billion most it in arrears and late interest said Tuesday it would lift half of the burden off Somalia’s shoulders while the remaining debt will be cleared when the country reaches the Completion Point in about three years’ time.
“This leads to the immediate non-ODA debt cancellation of US$ 1.4 billion in debt owed by Somalia to Paris Club creditors,” a statement from the Club read in part.
According to the 22 permanent member club which includes the U.S. U.K., France, Germany, Russia among others, Somalia owes it $2.7 billion most of which is in form of late interest and arrears.
But it noted $1.3 billion will be rescheduled until 2024 when Somalia will have reached the Completion Point under the HIPC process.
Finance Minister Abdirahman Beileh hailed the decision noting it was a product of reforms by Somalia. “I thank the Paris Club creditors for clearing $1.4 billion from #Somalia‘s debt during todays negotiations. This is in recognition of our strong track record of reform & commitment to rebuilding our country. We will continue with our reforms & go forward.”
Somalia reached the Decision Point under the Heavily Indebted Poor Countries (HIPC) initiative last week and both the World Bank and IMF announced the Horn of Africa nation will now be receiving interim debt relief.
To reach the Completion Point, Somalia will have to implement the 9th National Development Plan which now acts as an Interim Poverty Reduction Strategy Paper for about two years. In addition, it will also have to meet other reform benchmarks upon which it is expected to reach the Completion Point by March 2024.
At Completion Point, Somalia’s debt burden will be about $500 million which will subsequently be offset by the World Bank, IMF and Africa Development Bank under the Multilateral Debt Relief Initiative (MDRI).