Wednesday, December 3, 2025
https://www.hiiraan.com/news4/2023/Dec/194194/somalia_receives_4_5_billion_debt_relief_from_imf_and_world_bank_under_hipc_initiative.aspx
MOGADISHU (HOL) – The African Development Bank Group has canceled all outstanding African Development Fund debt for Somalia from 2024 to 2039, canceling $17.68 million in debt, after the country completed the Heavily Indebted Poor Countries Initiative and met the conditions for full multilateral debt relief.
The cancellation is part of an international effort to reduce Somalia’s external debt to an estimated $557 million from about $5.2 billion in 2018 once all creditors have made their contributions. Somali officials say the freed up fiscal space will support public services, infrastructure repair and reconstruction in communities strained by conflict, drought and the effects of climate change.
“Somalia has seized this moment with determination and discipline,” said Boubakar Sankare, the bank’s chief operating advisor for Somalia. “Debt relief opens the door to stronger institutions, better services and brighter prospects for the Somali people.” Officials said the savings would go towards hiring teachers, access to clean water and health facilities in areas affected by years of instability. The AfDB’s decision is also expected to strengthen Somalia’s creditworthiness and enable additional concessional financing for long-term recovery.
The move follows the IMF and World Bank’s approval of a $4.5 billion debt relief package in December 2023 under the HIPC Initiative. The relief package reduced Somalia’s debt-to-GDP ratio from about 64% in 2018 to less than 6% by the end of 2023, according to the agencies.
President Hassan Sheikh Mohamud called the milestone an “achievement” of reforms pursued by Somalia’s three governments. Former President Mohamed Abdullahi Farmaajo also welcomed the milestone, noting that his government had initiated reforms that would help Somalia become eligible for international financing again.
Finance Minister Bihi Iman Ege said achieving the HIPC required years of fiscal discipline and difficult reforms despite drought, insecurity and global shocks. Somalia increased domestic revenues, strengthened public financial management, and modernized central banking operations to meet the initiative’s criteria.
Somalia’s path to full relief began in 2013 with re-alignment with the World Financial Institutions. IMF Resident Representative Jean-Baptiste said Somalia had completed its staff monitoring program, which began in 2016, by reaching the HIPC “decision point” in 2020. Somalia has met 13 of the 14 completion triggers by 2023, including finance, governance, revenue mobilization, social sectors and national statistics.
Since the time of completion, Somalia has concluded several bilateral and regional agreements. France canceled $145.6 million in December 2024, and Denmark, Japan and the United States also canceled their claims. In April 2025, Somalia signed a $306.5 million debt relief agreement with the Arab Monetary Fund to restructure arrears owed to regional financial institutions.
Somalia is currently working to turn rising debt into sustainable growth. Under the three-year Extended Credit Facility Agreement with the IMF, officials improved income tax collection, modernized the customs system, strengthened spending controls, and strengthened the central bank’s regulatory framework. IMF staff reached staff-level agreement on a fourth review of the program in October 2025, which, if approved, could bring in an additional $30 million.
Despite these gains, Somalia remains vulnerable to the impacts of climate change and cuts in foreign aid. The IMF forecasts that growth will slow from 4.1% in 2024 to around 3% in 2025. Inflation is expected to remain around 3.5% due to soaring food prices due to repeated droughts and floods.
International partners say Somalia needs to maintain its reform momentum to sustain progress. World Bank Vice President Victoria Kwakwa urged deeper structural reforms to support private sector growth, while IMF President Jihad Azour said the completion of the HIPC was a “significant achievement” that would restore debt sustainability and open access to new financing.
