by: Enrico Casale | March 14, 2024
The Paris Club of creditors has reached an agreement with the government of Somalia which involves the cancellation of up to two billion dollars of Mogadishu’s debt, i.e. 99% of the debt owed by the country to the group. This was made known in a statement from the group yesterday in which it said it will forgive the country’s nominal debt of $1.2 billion under the framework of the strengthened HIPC (Heavily Indebted Countries) Initiative. The move comes after Somalia completed the IMF’s Enhanced Heavily Indebted Poor Countries Initiative.
“To help restore the sustainability of the Federal Republic of Somalia’s debt – it is written in a note from the Paris Club -, creditors have committed to canceling 1.2 billion dollars in nominal terms within the framework of the strengthened HIPC Initiative. Creditors welcomed and supported the commitment of the Federal Republic of Somalia to seek at least equally favorable treatment from all other bilateral and external official trade creditors.” And then he underlines: “The creditors of the Paris Club have confirmed their willingness to grant further debt relief on a voluntary and bilateral basis for an amount of 815 million dollars”.
The Paris Club consensus and further planned bilateral efforts would lead to a reduction of more than $2 billion, representing 99% of Somalia’s debt to Paris Club members as of January 2023. Furthermore, the Paris Club welcomed Somalia’s commitment to poverty eradication, education and health reforms to create the foundation for sustainable economic growth.
The Heavily Indebted Poor Countries (HIPC) initiative was launched in 1996 and has since canceled debt to the tune of $120 billion for 36 of the 39 eligible countries. Somalia is the 37th country to benefit from the initiative.
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