The Paris Club creditors have announced a landmark decision on Wednesday to cancel more than $2 billion of debt owed by Somalia, a move to support Somalia in restoring its debt sustainability and fostering economic recovery.
The debt relief represents 99 percent of the credit Somalia owed to Paris Club members as of January 2023.
The agreement was reached during a meeting between representatives of the Paris Club creditor countries and the Somali government, following Somalia’s Completion Point under the Enhanced Heavily Indebted Poor Countries (Enhanced HIPC) Initiative approval by the International Monetary Fund (IMF) in December 2023.
The Paris Club is an informal group of creditor nations dedicated to finding practical solutions to payment challenges faced by debtor nations. In a statement issued by the creditor group, it was highlighted that creditors welcomed and supported Somalia’s commitment to seek similar treatment from all its other official bilateral and external commercial creditors.
This decision reflects a coordinated effort by the international community to alleviate Somalia’s debt burden and facilitate its path to economic stability. By cancelling a significant portion of Somalia’s debt, the Paris Club aims to provide the country with the financial flexibility needed to address pressing socio-economic challenges and invest in its future development.
The Enhanced HIPC Initiative, overseen by the IMF and the World Bank, aims to assist the world’s poorest and most heavily indebted countries in reducing their debt burdens to sustainable levels. Somalia’s achievement of the Completion Point under this initiative signifies a crucial milestone in its efforts to address debt challenges and pursue sustainable economic growth.
Chioma Kalu
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