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Debt Relief Milestone In Somalia, As World Bank, IMF, Call For Global Payment Suspension In Light Of COVID-19

Global debt relief call: World Bank, IMF

It also coincided with a call by the World Bank Group (WBG) and the IMF for all official bilateral creditors to suspend debt payments from the world’s 76 poorest countries and enable them to redirect funds towards confronting the economic fallout from the COVID-19 pandemic.  In a joint statement, the two Washington-based institutions also asked leaders of the G-20 leading economies to task them at their spring meetings on 16 to 17 April with assessing the impact and financing needs of each of the countries, which are part of the International Development Association (IDA).

Mr. Swan, who is also the Secretary-General’s Special Representative for Somalia, said that the country’s debt breakthrough was testament to the federal authorities’ ability to manage public finances.  “It also reflects strong collaboration between the Federal Government and the federal member states,” he added. “The World Bank Group and the IMF believe it is imperative at this moment to provide a global sense of relief for developing countries as well as a strong signal to financial markets,” it said.

The World Bank and the IMF established the HIPC Initiative in 1996, to ensure that no poor country finds itself in a situation in which it cannot service and manage its debt burden.  Reaching “decision point” not only confirms Somalia’s eligibility for debt relief, but also fully normalizes its relations with international financial institutions.  It will also now qualify for certain types of grant financing to meet its public finance and development needs and to access private-sector financing instruments.  The second and final step after decision point, known as the completion point, would open the way for full and irrevocable reduction in debt under the HIPC Initiative. In a press release, the IMF said debt relief for Somalia – the 37th country to reach decision point – would help it make last change for its 15 million people by allowing its debt to be irrevocably reduced from $5.2 billion at the end of 2018 to $557 million once it reaches completion point in about three years’ time.

The International Monetary Fund (IMF) and the World Bank’s International Development Association have determined that Somalia has taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Somalia is the 37th country to reach this milestone, known as the HIPC Decision Point.

Debt relief will help Somalia make lasting change for its people by allowing its debt to be irrevocably reduced from US$5.2 billion at end-2018 to US$557 million in net present value terms (NPV) once it reaches the HIPC Completion Point in about three years’ time. As Somalia continues on its path towards stability and development after 30 years outside the international financial system, the immediate normalization of its relations with the international community will re-open access to critical additional financial resources to strengthen the economy, help improve social conditions, raise millions out of poverty, and generate sustainable employment for Somalis. “I would like to congratulate the Somali government and people for their intense efforts over the past years leading to this momentous event,” said Kristalina Georgieva, IMF Managing Director. “Successful reform efforts have laid the foundation for inclusive economic growth and for addressing the needs of the country’s most vulnerable people. Work must continue to sustain and expand the implementation of these reforms as Somalia starts a new chapter of its history. I am confident a more resilient and prosperous future lies ahead for the people of Somalia.”

“We welcome Somalia’s efforts to restore stability, engage with creditors, and adopt a poverty reduction strategy,” said World Bank Group President David Malpass. “Resumption of regular financing to Somalia is an important landmark, and we look forward to further economic and social progress. The Government and People of Somalia are very pleased by the IMF and World Bank Group’s decision which allows Somalia to fully re-engage with International Financial Institutions. This decision is an important milestone which presents ample opportunities for Somalia as it relentlessly pursues its ongoing reform processes as well as its recovery and development agenda,” said Hassan Ali Khayre, Prime Minister, Federal Government of Somalia . “The journey leading to this decision required hard work, dedication and partnership. The FGS expresses its appreciation to the IMF, World Bank Group and partners for their unwavering support and to the Somali people for their patience and resilience in this journey……


 

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