Somalia Receives 99% Debt Forgiveness From Paris Club Creditor Nations
13:52 14.03.2024 (Updated: 14:05 14.03.2024)
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Last December, the International Monetary Fund (IMF) and the World Bank announced a $4.5 billion debt relief package for Somalia. This initiative has resulted in a significant reduction in the country's external debt, which has decreased from 64% of its GDP at the end of 2018 to less than 6% by the end of 2023.
99% of Somalia's debt to members of the Paris Club of creditor nations was successfully canceled, the Paris Club said on Wednesday.
"The Paris Club consensus and the expected additional bilateral efforts would result in a reduction of more than $2.0 billion, representing 99% of the debt of the Federal Republic of Somalia owed to Paris Club members as of January 2023," the statement read.
The consensus on the debt cancellation for Somalia was reached following its Completion Point under the Enhanced Heavily Indebted Poor Countries Initiative, which was approved by the IMF and the World Bank in December 2023, the organization said.
The Paris Club welcomed Somalia's commitment to implement a comprehensive poverty reduction plan and an ambitious economic reform program. These efforts are aimed at laying the necessary groundwork for sustainable and inclusive economic growth.
Moreover, Somalia has made a commitment to use the financial flexibility offered by this debt treatment to fund key areas of expenditure (such as health, education, and basic infrastructure) identified in the country's poverty reduction policy.
Moreover, Somalia has made a commitment to use the financial flexibility offered by this debt treatment to fund key areas of expenditure (such as health, education, and basic infrastructure) identified in the country's poverty reduction policy.
Somalia's neighbor, Ethiopia, is also facing financial challenges: in late December of last year, the country defaulted on its international sovereign bond after failing to pay $33 million in coupons, according to the media. The Ethiopian Ministry of Finance cited declining foreign exchange reserves and an unsustainable external position.
