IMF, World Bank Clear Somalia for Debt Relief, Normal Ties to World (Reuters)
Last Modified: 02:12 PM, Wed Mar 25, 2020

By Andrea Shalal

25 March 2020

Word Count: 400

The IMF and the World Bank today said Somalia had taken the necessary steps to begin receiving debt relief, a decision that will allow the country to lower its $5.2b in external debt to around $557m. The decision will immediately normalize Somalia's relations with the world after 30 years outside the international financial system, the IMF and the World Bank's International Development Association said. Somalia's Paris Club creditors - including the United States, Russia, Italy and France - are expected to make a decision on debt relief for Somalia by the end of March, they said. The IMF said its Executive Board also separately approved a new three-year $395m financing arrangement for Somalia under its Extended Credit Facility and Extended Fund Facility. That program would support Somalia's implementation of its "ambitious reform agenda and catalyze concessional donor financing," the IMF said.

(Adds details, quotes, new IMF arrangement)

By Andrea Shalal

WASHINGTON, March 25 (Reuters) - The IMF and the World Bank on Wednesday said Somalia had taken the necessary steps to begin receiving debt relief, a decision that will allow the Horn of Africa country to lower its $5.2 billion in external debt to around $557 million.

The decision will immediately normalize Somalia's relations with the world after 30 years outside the international financial system, the International Monetary Fund and the World Bank's International Development Association said.

Somalia's Paris Club creditors - including the United States, Russia, Italy and France - are expected to make a decision on debt relief for Somalia by the end of March, they said in a joint statement.

Somalia is the 37th country to reach this "Decision Point" under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative.

"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," the bank and the fund said.

The IMF said its Executive Board also separately approved a new three-year $395 million financing arrangement for Somalia under its Extended Credit Facility (ECF) and Extended Fund Facility (EFF).

That program would support Somalia's implementation of its "ambitious reform agenda and catalyze concessional donor financing," the IMF said.

Normalization of relations with the international community will re-open Somalia's access to critical additional financial resources to strengthen the economy, help improve social conditions, raise millions out of poverty, and generate sustainable employment for Somalis, the IMF and World Bank said.

“We welcome Somalia’s efforts to restore stability, engage with creditors, and adopt a poverty reduction strategy,” said World Bank Group President David Malpass. “Resumption of regular financing to Somalia is an important landmark, and we look forward to further economic and social progress.”

IMF Managing Director Kristalina Georgieva congratulated Somalia for the intense efforts that had brought it to this point and laid the foundation for inclusive economic growth.

"Work must continue to sustain and expand the implementation of these reforms as Somalia starts a new chapter of its history," she said. "I am confident a more resilient and prosperous future lies ahead for the people of Somalia.” (Reporting by Andrea Shalal Editing by Chris Reese and Tom Brown)

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Creditline: Reuters
Slugline: SOMALIA-DEBT/ (UPDATE 1)