Somalia positive for economic revival after IMF debt relief

A debt relief of $4.5 billion from international creditors- the International Monetary Fund (IMF) and the World Bank – is the latest news to greet Somalia. The IMF on Tuesday in a statement noted that Somalia was deserving of the relief having implemented a poverty reduction strategy for at least a year, and maintained a “track record of sound macroeconomic management.” A cross section of Somalis on the streets of Mogadishu are reacting positively to the development.

“We’re very happy because we’re going to see our economy improve. This will relieve us of a heavy burden” says Ibrahim Hassan Abdi, a money changer in the capital Mogadishu.

For Ali Abdi, another Mogadishu resident, Somalia can now issue its own currency. “The country’s economy will improve and we will be able to build infrastructures such as a new airport” 

The green light comes as Somalia reached the “completion point” of the Heavily Indebted Poor Countries Initiative (HIPC), the IMF added in a statement.

‘Significant strides’ –

The US Treasury Department added in a separate statement on Wednesday that Washington intends to cancel 100 percent of its remaining claims, “bringing the total amount of U.S. debt relief for Somalia under HIPC to around $1 billion.”

The aim is to “support Somalia as it continues rebuilding its economy,” Treasury said.

“For Somalia to move forward in the positive economic direction we all needed, we had to reform our laws, systems, policies, and practices,” said Somalia’s President Hassan Sheikh Mohamud.

He added that the country’s debt relief process has involved nearly a decade of governmental efforts spanning three political administrations.

“We are very pleased with the debt relief, because our currency is almost destroyed, as Somalia has not officially issued banknotes for about 32 years” says Abdulkadir Mohamed Roble, a market vendor in central Mogadishu. “We can benefit from this debt relief because we will be able to have a new functional banknote, which will allow the country’s economy to develop. As you can see, our banknote is like that, so we need to issue a new one that is acceptable worldwide.” 

Somalia’s external debt has fallen from 64 percent of gross domestic product in 2018 to less than six percent of GDP by the end of 2023. The east  African nation has struggled to recover from decades of civil war, and with around 70 percent of its population living on less than $1.90 a day according to the world bank.