The Paris Club of creditors has reached an agreement with the government of Somalia to cancel up to $2 billion of the country’s debt, approximately 99 % of which is owed by the country to the group.
This was disclosed in a statement from the group yesterday where it stated it will forgive the country’s nominal debt of $1.2 billion under the Enhanced HIPC Initiative framework, according to nairametrics.
This follows Somalia’s completion of the Enhanced Heavily Indebted Poor Countries (Enhanced HIPC) Initiative of the IMF where the country was exiled from the international financial system for about 30 years.
Paris Club said “To contribute to restoring the debt sustainability of the Federal Republic of Somalia, Paris Club creditors committed to cancel USD 1.2 billion in nominal terms under the Enhanced HIPC Initiative framework. Creditors welcomed and supported the commitment to cancel USD 1.2 billion in nominal terms under the Enhanced HIPC Initiative framework. Creditors welcomed and supported the commitment of the Federal Republic of Somalia to seek treatment at least as favourable from all its other official bilateral and external commercial creditors.
“In addition, Paris Club creditors confirmed their willingness to grant additional debt cancellation on a voluntary and bilateral basis for an amount of USD 815 million.
“The Paris Club consensus and the expected additional bilateral efforts would result in a reduction of more than USD 2.0 billion, representing 99% of the debt of the Federal Republic of Somalia owed to Paris Club members as of January 2023.”
In addition, the Club welcomes Somalia’s commitment to poverty eradication, education and health reforms with a view to developing an enabling environment for sustained growth.
The Heavily Indebted Poor Countries initiative was launched in 1996, and during that period has cancelled debt to the tune of $120 billion for 36 out of 39 qualified countries. The 37th country to take advantage of the initiative is Somalia.
The $2.0 debt cancellation for Somalia represents over 50% of the country’s public external debt of $3.8 billion.
