By T. Roble
Somalia’s push for debt relief received a major boost Thursday after the World Bank and IMF announced the Horn of Africa nation was now eligible for assistance under the debt relief process adding a major threshold could be reached by March should reform efforts be sustained.
The two Bretton Woods institutions said they were satisfied Somalia was eligible for debt relief based on a preliminary assessment which is an important step to ridding the country of the $5.3 billion debt which has denied it access to credit from the international market.
Noting that the decision was ‘historic’ IMF managing director Kristalina Georgieva said the agreement affirmed Somalia’s efforts to meeting requirements for debt relief.
“Today’s agreement by the IMF Executive Board that Somalia can be eligible for debt relief under the Enhanced HIPC Initiative marks a historic moment. It provides a clear recognition of Somalia’s sustained commitment to key economic and financial reforms under consecutive staff-monitored programs with the IMF,” said Georgieva.
She added that it was the Fund’s commitment to helping Somalia ‘achieve debt relief and unlock access to the needed resources to increase growth and reduce poverty’.
World Bank President David Malpass echoed IMF’s view noting the assessment ‘was an important step towards Somalia resuming financing from international financial institutions, including IDA, our fund for the poorest countries’.
Somalia will however still need to do the heavy lifting to realise debt relief. This includes satisfactory performance under the current IMF Staff-Monitored Program (SMP), clearance of arrears to multilateral creditors or an agreement on a strategy to clear them.
According to the statement Thursday, World Bank staff are expected to ‘present the operation for clearing the arrears to the International Development Association (IDA) by the end of February 2020.’
Should Somalia meet these benchmarks among others, it will reach the Decision Point under the Heavily Indebted Poor Countries (HIPC) threshold in March 2020.
Once Somalia has reached the Completion Point, it would qualify for unconditional debt relief under the HIPC Initiative, and for debt relief under the Multilateral Debt Relief Initiative (MDRI) from the World Bank’s IDA and the African Development Fund (AfDF), together with beyond-HIPC assistance from the IMF. Paris Club creditors are also expected to provide further beyond-HIPC assistance at the Completion Point.