Mogadishu, SOMALIA – Somalia has officially reached the Heavily Indebted Poor Countries (HIPC) Completion Point, a historic milestone in its economic journey. Endorsed by the Executive Boards of the International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA), this achievement brings significant debt relief and opens new avenues for growth and development.
A Decade of Reform and Progress
Over nearly a decade, cross-governmental efforts spanning three political administrations have led to this moment. President Hassan Sheikh Mohamud aptly described this achievement as a testament to Somalia’s national commitment and prioritization of an enabling agenda. Consequently, this milestone is the culmination of extensive reforms in laws, systems, policies, and practices initiated nearly a decade ago.
The HIPC Initiative, launched in 1996 by the World Bank and IMF, aims to ensure debt sustainability in the world’s poorest and most heavily indebted countries. For Somalia, reaching the HIPC Completion Point under this initiative signifies a dramatic reduction in its external debt, plummeting from 64 percent of GDP in 2018 to less than 6 percent by the end of 2023. This reduction in debt burden, totaling US$4.5 billion in savings, is set to revitalize Somalia’s economy.
Moreover, debt relief provided by various institutions, including the IMF, IDA, African Development Fund (ADF), other multilateral creditors, and bilateral and commercial creditors, marks a significant easing of Somalia’s financial burdens. This relief will enable access to essential financial resources, helping the country bolster its economy, alleviate poverty, and promote job creation.
Somalia’s Economic Reform: A National Effort
Somalia’s Finance Minister, H.E. Bihi Iman Egeh, emphasized that the reform journey has been a true national process, culminating in the success of determined economic reform implementation. Despite external challenges like climatic shocks and ongoing fights against terrorism, Somalia has shown commendable progress in structural reforms, including improvements in public financial and expenditure management, domestic revenue mobilization, governance, social sectors, and statistics.
Similarly, the IMF and the World Bank have acknowledged Somalia’s significant strides in rebuilding its economy and institutions after years of civil unrest. Somalia reaching the HIPC Completion Point not only restores debt sustainability but also paves the way for new external financing, critical for supporting inclusive growth and poverty reduction.
Therefore, with the HIPC Completion Point reached, deepening structural reforms will be crucial for Somalia. The focus should now shift to boosting private sector growth and creating fiscal space to invest more in human capital and infrastructure. This approach is vital for fostering inclusive and resilient growth.
Sustaining Reform Momentum in Somalia Post-HIPC
Maintaining sound macroeconomic policies and sustaining the reform momentum are critical for Somalia to fully benefit from the debt relief. The IMF’s new three-year financial arrangement and the World Bank’s five-year Country Partnership Framework with Somalia will provide the necessary technical assistance and policy guidance for achieving these goals.
The debt service savings of US$4.5 billion incorporate substantial relief under various initiatives. This financial leeway is therefore expected to improve Somalia’s creditworthiness and its ability to attract investment and conduct business on the international stage.
In conclusion, reaching the HIPC Completion Point is a historic achievement for Somalia, signifying the country’s resilience and dedication to economic reform. This milestone paves the way for Somalia to build a stronger, more resilient economy, reduce poverty, and enhance its standing in the global economic community.
