Mogadishu (Caasimada Online) – Somalia is gearing up for a significant economic milestone. The International Monetary Fund (IMF) and other international lenders are set to grant the country comprehensive debt relief by December.
The potential relief comes in recognition of Somalia’s diligent efforts to enhance domestic revenue and augment the transparency of its public finance management.
Laura Jaramillo, leading the IMF team, affirmed Somalia’s achievements. “Somalia has met almost every requirement for full debt relief,” Jaramillo stated.
However, she emphasized the need for more progress, remarking, “Building on the progress thus far, the main focus should be on fortifying domestic revenue, enhancing public financial management, and bolstering financial deepening and inclusion.
Additionally, improving governance and data collection is vital.”
Somalia’s economic journey
The context of these achievements is crucial. Somalia, located in the Horn of Africa, has been striving to revitalize its economy amidst numerous challenges.
The nation’s economic journey hasn’t been smooth, from drought and floods to food shortages and security threats.
Yet, despite these adversities, the country has made significant strides in implementing vital economic reforms.
The lenders lauded Somalia, stating, “The enacted reforms, aiming to optimize public resource utilization for the benefit of Somali citizens and stimulate economic growth, are beginning to yield positive results.”
This growth is pivotal as it paves the way for job opportunities, benefiting the nation at large.
Somalia’s challenges, including climate catastrophes, dwindling remittances, and unstable security conditions, could have easily stalled its economic recovery.
Yet, the nation’s unwavering dedication to its reform strategies has been commendable.
Debts to sustainable development
Somalia’s journey towards debt relief began earnestly in March 2020 when it reached the decision point under the Heavily Indebted Poor Countries (HIPC) initiative.
This achievement reduced its debt from a staggering $5.2 billion to a more manageable $3.7 billion.
Upon completing the HIPC initiative, Somalia stands to gain debt relief from esteemed institutions like the IMF, World Bank, African Development Bank, Inter-American Bank, the 22 members of the Paris Club, and any other willing lenders.
The expected debt relief will dramatically reduce Somalia’s outstanding loans from $3.3 billion to a mere $557 million, equivalent to about 10% of its GDP.
This reduction grants the nation the much-needed flexibility to address the challenges hindering its economic advancement.
Moreover, Somalia is poised to join a league of nations, including Burundi, Rwanda, Tanzania, Uganda, Ethiopia, and the Democratic Republic of Congo.
These countries are among the 31 underdeveloped nations that have previously benefited from the debt relief initiative.