Somalilandsun –The board of executives of the International Monetary Fund( IMF) has approved a financing plan that will help the IMF cover its share of debt relief for Somalia. The statement was made recently by the Managing Director of IMF, Kristalina Georgieva. She added that the financing plan includes cash grants from member countries and IMF internal resources. reports the Ventures Africa
“This marks a critical step in helping Somalia advance the process of normalizing relations with the international community and making progress towards achieving debt relief under the Heavily-Indebted Poor Country (HIPC) initiative,” Georgieva said.
She further stated that a decision unlocking debt relief could come as soon as members provided the necessary financial commitments, assuming Somalia’s government continued its strong reform efforts.
Somalia has about $5 billion in external debt, accounting for about 100 percent of its GDP. Georgieva explained that the debt relief for Somalia was a priority for the IMF and added that she was encouraged by the support of its members on the issue. The funds will be used to clear Somalia’s arrears to the IMF. She stressed that the debt relief would “help unlock significant new financial resources to address Somalia’s large development needs and poverty reduction.”
On a Twitter post, Somali’s finance minister, Abdirahman Duale Beileh, welcomed the news adding, “We are grateful to all partners for their continued support in our journey to debt cancellation. We will march on with economic reforms.”
Since resuming its relationship with the country in 2013, the IMF has concluded two annual economic assessments—the first in 2015—marking the first IMF consultation with the country since 1989. Because Somalia was in arrears with the IMF it could not benefit from IMF loans; however, the authorities had engaged with the IMF in the context of a 12-month staff-monitored program.
This has helped create a framework to support the country’s economic reconstruction efforts, rebuild institutional capacity, and establish a track record of policy and reform implementation. The first review of this program was completed in February 2017.
In October, Beileh cited positive discussions with the United States, Somalia’s biggest creditor, Britain and others during the IMF/World Bank annual meetings, and said he expected a decision in favour of debt relief in February.
This debt relief approval would bring about financial stability and an economic boost in the horn of Africa country as resources would be focused more on driving the economy. It would also encourage international lenders and investors to invest in the country’s potentials.