Somalia-born US Congresswoman Ilhan Omar has announced a deal to cancel Somalia’s debt had been reached but there was no clarity on the nature of the cancellation as the IMF board meets today.
A statement from the lawmaker’s office indicated efforts to secure debt relief for Somalia had borne fruit. “
“I am thrilled we were able to secure debt relief for Somalia today. Somalia continues to hold crushing amounts of debt—which holds back the economy and keeps millions of Somalis in poverty,” Omar said.
This doesn’t just have an impact on Somalis, but on the thousands of Somali- Americans who live in my district and have family in the region, she added.
The statement did not however indicate what the debt relief entailed. Somalia owes the US $1 billion in arrears accrued over years with most of it in form of loans to the dictatorial regime of Mohamed Siad Barre during the Cold War period. The entire debt to Somalia stands at $4.7 billion.
IMF BOARD MEETING
The statement came hours ahead of the IMF board meeting today which is expected to deliberate on the clearance of Somalia’s debt to IMF. Clearance of this debt and that of the World Bank is mandatory measure under the Heavily Indebted and Poor Countries (HIPC) initiative.
IMF spokesman Gery Rice said Monday the board will also be exploring means of settling debts owed to bilateral and multilateral creditors whose accumulated debt to Somalia in the upwards of $3 billion.
Norway announced in October it will be considering a bridging loan approval for Somalia in January to allow Somalia clear the $350 million debt owed to the World Bank.
Clearance of the debts to the two Bretton Woods institutions and fulfilment of other fiscal and governance measures including adoption of a Poverty Strategy Paper (PRSP) will allow Somalia cross into the decision point under the HIPC process.
This should unlock much needed limited concessions loans and grants for Somalia as it works to cross to the completion point.