Paris Club Announces $2 Billion Debt Cancellation for Somalia

Thu Mar 14 2024
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NAIROBI: Somalia has reached an agreement with international creditors to eliminate over $2 billion (1.8 billion euros) in debt, announced the Paris Club of creditor nations.

The deal, disclosed on Wednesday, follows the approval of $4.5 billion in debt relief by the International Monetary Fund and the World Bank in December for the troubled Horn of Africa nation.

Despite enduring decades of civil war, insurgency by Al-Shabab, and frequent climate disasters, Somalia remains one of the world’s poorest countries.

Paris Club a Group of Creditor Nations

The Paris Club, an informal group of creditor nations, revealed that the $2 billion debt cancellation represents 99 percent of Somalia’s debt to its members as of January 2023. The agreement included representatives from the United States, Russia, Britain, France, and other European nations.

“Paris Club creditors acknowledged Somalia’s commitment to implementing a comprehensive poverty reduction strategy and ambitious economic reform program,” stated the Paris Club.

Somalia’s government pledged to allocate the fiscal space provided by the debt relief to priority expenditure areas such as health, education, and basic infrastructure, as outlined in the country’s poverty reduction strategy.

According to World Bank data, approximately 70 percent of Somalia’s population lives on less than $1.90 a day.

The IMF-World Bank agreement in December coincided with Somalia reaching the “completion point” of the Heavily Indebted Poor Countries Initiative (HIPC).

The IMF reported a significant reduction in Somalia’s external debt, from 64 percent of GDP in 2018 to less than six percent by the end of 2023.

Moreover, the IMF expected Somalia’s GDP to grow by 3.7 percent in 2024, supported by recovery in agriculture, remittances, and investment, though risks persist.

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