The debt relief is part of the Heavily Indebted Poor Countries (HIPC) initiative, which aims to help the world’s poorest countries reduce their debt burden and achieve debt sustainability.
The HIPC initiative is a joint effort by the World Bank and the International Monetary Fund (IMF) to provide debt relief to eligible countries that meet certain criteria. Somalia is the 37th country to reach the completion point under the HIPC initiative.
The EastAfrican reports that the US Ambassador to Somalia, Richard H. Riley, and Somalia’s Finance Minister, Bihi Iman Egeh, attended a brief ceremony at the US Embassy in Mogadishu, where the debt relief agreement was signed.
The US Ambassador stated that the debt relief was worth $1.14 billion and was a strong sign of US commitment to Somalia’s future.
“This debt forgiveness is a testament to our unwavering commitment to support the Somali people on their journey toward a brighter future,” Mr Riley said
With the debt relief, Somalia would no longer be burdened by its debts thus allowing the government to redirect its spending to urgent matters as the country really needed financial support to rebuild its economy and improve the lives of its people.
Somalia last received a debt relief offer in December 2023.
This was also put in place by the IMF and the World Bank’s IDA as part of the HIPC Completion Point for Somalia.
The debt relief package which stood at US$4.5 billion as at then, dropped Somalia’s external debt from 64% of GDP in 2018, to less than 6% of GDP by end 2023.
The debt relief will facilitate access to critical additional financial resources that will help Somalia strengthen its economy, reduce poverty, and promote job creation.
