Somalia debt free by 2023 as country reaches key relief milestone
By T. Roble
Somalia will see its debt burden officially lifted from her shoulders in 2023, the IMF has said as the country reaches the Decision Point under the debt relief programme enabling the Horn of Africa nation to re-engage with the international financial system.
The IMF and the World Bank said Wednesday it was satisfied Somalia should now start receiving debt relief after meeting stringent economic reforms terms and offsetting arrears owed to the three multilateral creditors-World Bank, IMF and African Development Fund.
According to a statement from the Fund, Somalia’s debt will have reduced significantly in three years’ time once the country reaches the Completion Point under the Heavily Indebted Poor Countries (HIPC) initiative upon which the balance will be offset under the Multilateral Debt Relief Initiative (MDRI).
COMPLETION POINT
“Debt relief will help Somalia make lasting change for its people by allowing its debt to be irrevocably reduced from US$5.2 billion at end-2018 to US$557 million in net present value terms (NPV) once it reaches the HIPC Completion Point in about three years’ time,” a statement from IMF read in part.
Once Somalia reaches the Completion Point which is estimated to be in three years’ time, the World Bank’s IDA (International Development Association), the IMF and the African Development Fund will clear the remaining balance under the MDRI facility.
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The MDRI was created in 2005 to reduce further the debt of eligible low-income countries and provide additional resources to help them reach their development objectives.
According to a statement from IMF Wednesday, Italy cleared Somalia’s arrears to the IMF through a bridging loan which was subsequently reimbursed using the front-loaded access under the new IMF financial arrangement. This debt will later be cleared once Somalia reaches the Completion Point through pledges from 100 members which the Fund secured early this month.
The Fund said the Paris Club creditors whose key members include United States, Russia, Italy, and France will be reaching a decision by the end of this week on debt relief. The Paris Club creditors control the largest debt ratio of 53%.