Somalia eligible for $5.3 billion debt relief as World Bank and IMF laud FGS for reforms
MOGADISHU, Somalia - President Farmajo's administration has set the pace for much anticipated $5.3 billion debt relief, a move critical for economic growth in Somalia.
Executive Boards for International Monetary Fund [IMF] and World Bank on Thursday commended Somalia for commitment towards "economic and institutional reforms", paving way for debt relief.
The two bodies have agreed that Somalia is eligible for assistance under Enhanced Highly Indebted Poor Countries [HIPC], a move critical towards debt relief, the statement read.
Kristalina Georgieva, IMF's Managing Director, and Acting Chair termed the move "historic", adding that it would help Somalia unlock access to needed resources.
"It provides clear recognition of Somalia’s sustained commitment to key economic and financial reforms under consecutive staff-monitored programs with the IMF," she said.
The IMF boss said the move helps to "increase growth and reduce poverty is a key priority for the IMF." She added: "I am very grateful to our members for all their support in this endeavor."
David Malpass, World Bank Group President, said the move is critical towards Somalia resuming financing from international institutions.
Federal Government of Somalia, he said, worked closely with the World Bank in paving way for radical financial reforms, with the aim of setting required standards.
"I congratulate Somalia for embracing important reforms that can do much to encourage sustainable poverty reduction," he noted.
External assistance had been limited in Somalia, a country struggling with ghosts of civil wars, due to improper institutions and massive corruption.
To complete the journey to the HIPC Decision Point, IMF said, Somalia’s performance under the current IMF Staff-Monitored Program [SMP] will need to be confirmed as satisfactory.
Further, World Bank staff expect to present the operation for clearing the arrears to the International Development Association (IDA) by the end of February 2020.
Once Somalia has reached the Completion Point, it would qualify for unconditional debt relief under the HIPC Initiative, the joint statement read.
Abdirahman Beileh, Somalia's Finance Minister, termed the development "historic moment", adding that "Proud day. We remain committed to reforms and sustainable development."
The HIPC Initiative is a framework, created by the IMF and World Bank, in which all creditors, including multilateral creditors, provide debt relief to the world's poorest and most heavily indebted countries.
Already, the US has resumed financial assistance to Somali National Army [SNA], another indication of gradual faith in Somalia's financial reforms.
Somalia's GDP had been exceeded by the debt, a situation that threatens to cripple the fragile economy, which has struggled for decades, IMF had warned.