Wednesday April 1, 2020
MOGADISHU (HOL) - A group of creditors under the Paris Club framework have agreed to cancel Somalia’s debt amounting to $1.4 billion marking a major milestone in the country’s quest for debt relief.
The Club made up of about 23 countries and includes among them the U.S, UK and France said Tuesday they had agreed to forgive Somalia of the debt and pledged to offset the balance when the Horn of Africa nation reaches the Completion Point in 2023.
“This agreement was concluded under the so called “Cologne terms” designed by the Paris Club to provide interim debt relief as part of the HIPC initiative.
This leads to the immediate non-ODA debt cancellation of US $1.4 billion in debt owed by Somalia to Paris Club creditors,” the Club said in a statement.
Noting that Somalia is expected to reach the Completion Point by 31 March 2023 and receive the remainder of the debt, the Club noted there will be no payments expected from Somalia until ‘at least 31 March 2024.’
Finance Minister Abdirahman Beileh said in a tweet the decision by the Paris Club was an affirmation of his country’s reform path.
“I thank the Paris Club creditors for clearing $1.4 billion from #Somalia's debt during todays negotiations. This is in recognition of our strong track record of reform & commitment to rebuilding our country. We will continue with our reforms & go forward,” Beileh tweeted.
Somalia’s consolidated debt to the Paris Club amounts to $2.17 billion most of which is composed of arrears and late interests. The Club said Tuesday it would defer $1.3 billion of these to 2023 when Somalia is expected to reach the Completion Point under the Heavily Indebted Poor Countries (HIPC) initiative.
The announcement by the Paris Club comes barely a week after the World Bank and IMF determined Somalia was now eligible for interim debt relief having reached the Decision Point under the HIPC process.