New York(Mogadishu24)-The Federal Government of Somalia has reached a significant milestone as it achieved the heavily Indebted Poor Countries (HIPC) Initiative Completion Point, which has resulted in a remarkable debt relief of $4.5 billion.

The Executive Boards of the International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) have on Wednesday unanimously approved the debt relief for Somalia following the HIPC Completion Point. This strategic move has substantially reduced Somalia’s external debt from 64 percent of GDP in 2018 to less than 6 percent of GDP by the end of 2023.

The debt service relief, amounting to $4.5 billion, is a collective effort involving various contributors. The IMF contributed $343.2 million, IDA contributed $448.5 million, the African Development Fund (ADF) offered $131.0 million, and additional support from other multilateral creditors amounted to $573.1 million.

Bilateral and commercial creditors, including members of the Paris Club and creditors from the Arab Coordination Group, played a crucial role by contributing $3.0 billion to this monumental debt relief.

President Hassan Sheikh Mohamud expressed gratitude for the World Bank, IMF, and other international debt owners.

He stated crucial debt relief is expected to pave the way for enhanced access to critical financial resources, supporting the nation’s efforts to strengthen its economy, reduce poverty, and foster job creation.

“Somalia’s debt relief process has been nearly a decade of cross governmental efforts spanning three political administrations. This is a testament to our national commitment and prioritization of this crucial and enabling agenda,” said President, Hassan Sheikh Mohamud.

“For Somalia to move forward in the positive economic direction we all needed, we had to reform our laws, systems, policies, and practices. Reaching the HIPC Completion Point is the fruit of these reforms. When my government committed to the reform program nearly a decade ago, this was the result we envisaged,” he added.

Somalia’s Finance Minister Bihi Iman Egeh highlighted Somalia’s reform journey, terming it a ‘true national process’ and expressing pride in reaching the HIPC Completion Point.

He emphasized that through enabling reforms, Somalia had consistently raised domestic revenue, strengthened public financial management, improved governance, and enhanced national institutions.

“Somalia’s reform journey has been a true national process culminating in the remarkable success of determined economic reform implementation despite external challenges such as painful regular climatic shocks and the ongoing fight against international terrorism. We are proud to have reached the HIPC Completion Point,” said Somalia’s Minister of Finance, H.E. Bihi Iman Egeh.

The Executive Directors of both the IMF and the World Bank praised Somalia’s remarkable progress despite challenges, such as the global Covid-19 pandemic, drought, locust infestation, external shocks, and security risks.

Jihad Azour, the IMF’s Director for the Middle East and Central Asia, stated, “The Completion Point is a momentous achievement that restores debt sustainability and over time offers access to new external financing to support inclusive growth and poverty reduction.”

World Bank Vice President for Eastern and Southern Africa, Victoria Kwakwa, emphasized that Somalia has implemented critical reforms to support pro-poor growth, poverty reduction, better public financial management, and debt management.

“Somalia has implemented critical reforms in support of pro-poor growth, poverty reduction, better public financial management and debt management. These reforms establish the conditions for the effective use of irrevocable debt relief to support the people of Somalia. Deepening structural reforms after the Completion Point will be critical to boost private sector growth and create fiscal space to invest more in human development and infrastructure in support of inclusive and resilient growth,” Ms. Victoria said.

Both the World Bank and IMF pledged to continue providing technical assistance and policy guidance to support Somalia in achieving its institutional reforms and state-building efforts.

The federal government of Somalia reiterated its commitment to sustaining the reform momentum post-HIPC, focusing on building resilience, promoting inclusive growth, and reducing poverty.

The debt service savings of $4.5 billion incorporate debt relief under the Enhanced HIPC Initiative, the Multilateral Debt Relief Initiative (MDRI), and beyond-HIPC debt relief from the IMF, demonstrating the international community’s confidence in Somalia’s ability to manage its security forces and institutions effectively.