Major boost for Somalia as IMF, AfDB approve over $5.4 billion in arrears clearance

Somalia’s push for debt relief got a big boost Wednesday following an approval of close to half a billion dollars by both IMF and African Development Bank to clear arrears due to the financial institutions by the Horn of Africa nation.

The two financial institutions announced separately Friday the approval of the funds marking a major milestone in the debt relief process which is expected to unlock credit for Somalia’s reconstruction process.

“Over 100 IMF member countries have pledged to provide more than SDR 242 million (US$334 million) in financing. Once all pledges are formalized, a process will be followed of clearance of arrears to the Fund and new Fund financing that will enable the delivery of HIPC Initiative and other debt relief to Somalia,” IMF said in a statement.

The Fund’s Managing Director Kristalina Georgieva hailed the approval noting it would go a long way in fast-tracking the debt relief. Somalia’s external debt which accrues from the 1980s stands at about $5.4 billion estimated to be 98% of the country’s GDP.

Said, “Georgieva Today’s financing milestone opens up a historic opportunity for Somalia to move toward comprehensive debt relief from the IMF and the international community. We are firmly committed to supporting Somalia in its recovery after a long period of conflict and devastation.”
She noted the pledge now takes Somalia a step closer to the Decision Point under the Heavily Indebted Poor Countries (HIPC) initiative.

Similarly, the African Development Bank and African Development Fund also approved a framework for $122.55 million to clear Somalia’s arrears, ‘paving the way for the Bank Group to fully reengage with Somalia and opening opportunities for enhanced financing for the country.’

“It is a historic day for us as a Bank. I think collectively we should be very proud of what has happened…difficulties cannot be allowed to exist forever.. because it defeats the very purpose of why we are here to serve,” President of the African Development Bank Akinwumi Adesina said
Somalia’s debt to the IMF stands at $340 million representing 7% of the external debt while to the World Bank, Somalia owes $500,000 (11%) and $140 million to the African Development Bank (3%).

Finance Minister Abdirahman Beileh hailed the announcements from the two financial institutions.

“The Board of @AfDB_Group  & #African Development Fund approved a framework to clear #Somalia’s arrears, paving the way for the Bank Group to fully reengage with Somalia. This follows similar decisions by  @IMFNews @WorldBank.  Thank you!,” tweeted Beileh.