Somalia secures $4.5 billion debt relief deal with international creditors
Somalia has secured a $4.5 billion debt relief deal from its international creditors,
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Your support makes all the difference.Somalia on Wednesday secured a $4.5 billion debt relief deal from its international creditors, the International Monetary Fund and World Bank said, which will allow the nation to develop economically and take on new projects.
The deal comes as part of a debt forgiveness program ācalled the Heavily Indebted Poor Countries initiativeā overseen by both organizations. As a result of its participation in the program, Somaliaās external debt will fall from 64 percent of GDP in 2018 to less than 6 percent of GDP by the end of 2023, the IMF and World Bank say in a joint news release.
Somaliaās national debt currently exceeds $5 billion, according to official figures.
āSomaliaās debt relief process has been nearly a decade of cross governmental efforts spanning three political administrations. This is a testament to our national commitment and prioritization of this crucial and enabling agenda,ā said Somaliaās President, H.E. Hassan Sheikh Mohamud in a statement.
U.S. Treasury said it intends to cancel 100 percent of Somaliaās remaining claims and āurges Somaliaās other bilateral creditors to be equally generous and to move expeditiously.ā
The deal is āa significant milestone in Somaliaās path to continued recovery and meaningful reform to promote greater stability and economic opportunities for the Somali people,ā U.S. Treasury Secretary Janet Yellen said.
Ali Yasin Sheikh, deputy governor of Somaliaās central bank, told The Associated Press Wednesday that debt relief under the Heavily Indebted Poor Countries initiative comes as a relief for his country, which is eager to secure new funding for public projects.
In addition, he said, now it will be easier for Somalia to attract new investors.
āDebt forgiveness will lead to a change in the worldās perception of the countryās economic stability, he said. āSomalia will be able to access global funds and investments from all over the world, as it is open to international financial markets.ā
He warned, however, that āit is crucial to ensure that measures are put in place to prevent Somalia from slipping back" into high debt again.
Somalia remains one of the worldās poorest countries, beset mostly by security challenges stemming from years of unrest.
The Horn of Africa country is trying to achieve political stability with transitions such as the one that ushered in Hassan Sheikh Mohamud in 2022, despite setbacks including an ongoing insurgency by al-Shabab. The extremist group, which opposes the federal government, still controls large parts of rural Somalia. Al-Shabab regularly carries out deadly attacks in Mogadishu, the capital, and elsewhere in the country.
Somalia also is vulnerable to climate-related shocks, with some parts of the country nearing famine conditions, according to the World Bank. At the same time, heavy rains in parts of Somalia recently have triggered destructive flooding.
Debt relief will free up revenue, including from meager but expanding domestic sources, to invest in key public infrastructure, said Mohamed Mohamud Adde, an independent political analyst and academic based in Mogadishu.
āIt is crucial for the Somali government to have its debts cleared, since the government is not able to raise taxes from the public and cannot borrow money from international institutions due to these debts,ā he said. āThe old infrastructure of Somalia has been eroded by time and civil war. Thus, building new roads is essential for the countryās development. This would create jobs and facilitate peopleās ability to trade with each other. ā
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Faruk contributed from Mogadishu.