Nairobi(Mogadishu24)-A 10-days long review meeting of Somalia’s debt relief process on Friday concluded in Nairobi, with staff-level agreement reached on the sixth review of Somalia’s Extended Credit Facility (ECF) arrangement.

The review meeting discussed several key aspects, including the progress made by the Somali government in financial reforms, upcoming economic opportunities, existing challenges, and the status of Somalia’s debt relief efforts, which are nearing completion.

In a statement released by the International Monetary Fund (IMF) on Friday, the IMF expressed huge satisfaction with Somalia’s financial progress in macroeconomics and institutional reforms.

The IMF stated that this reforms show the government’s commitment to achieve the Heavily Indebted Poor Countries (HIPC) Completion Point by December 2023, a significant milestone that would substantially reduce Somalia’s external debt.

“The Somali authorities have continued to make progress toward meeting the conditions for achieving the HIPC Completion Point in December 2023, at which time Somalia’s external debt would be reduced to less than US$600 million in net present value terms, compared to US$5.2 billion at end-2018,” the statement read.

The international monetary fund staff reiterated their commitment to provide support to Somalia in pursuit to strengthened economic institutions and promote macroeconomic stability and inclusive growth.

Somalia’s Minister planning, investment and economic development Hon. Mohamud Beenebeene highlighted the government’s ambitious goal of reaching the HIPC Completion Point (CP) by December 2023.

“The Federal Government of Somalia have continued to make progress in implementing the ECF-supported program and is working toward achieving the HIPC Completion Point (CP) in December 2023,” Hon. Beenebeene said on his official X account.

During meeting the IMF team led by Laura Jaramillo held talks with the representatives from Somalia on September 11-21, and reached the agreement which is subject to approval from the IMF’s Executive Board.

Ms. Laura Jaramillo noted Somalia’s path to recovery and institutional reforms amid ongoing challenges that demand unwavering commitment.

“Somalia has continued to make important progress in rebuilding its economy and institutions, but challenges remain significant,” Ms. Laura Jaramillo stated.

She pointed out the effects of the prolonged droughts, flooding, and other humanitarian crises on Somalia’s economic resurgence.

“Notwithstanding the resumption of rainfall in 2023Q1, economic activity has been weighed down by the lingering effects of drought, recent floods, and subdued remittances.”

“Food insecurity remains a concern and the security situation is challenging in some parts of the country. Near-term risks are elevated, including a worsening of food insecurity if healthy rainy seasons do not persist or if there is a global food shock,” she added.

Despite the challenges faced by Somalia, the government’s authorities have continued to achieve progress in implementing the ECF-supported program and are working toward achieving the HIPC Completion Point (CP) in December 2023.

In 2023, Somalia’s economy is forecasted to grow moderately at 2.8% with 5.7% inflation. Strong domestic revenue, including customs, prevails, with a minor 0.1% GDP deficit to be covered by existing funds.

The Central Bank of Somalia (CBS) is advancing institutional governance and financial sector reforms. The CBS will continue to enhance its regulatory and supervisory capacity, including through legislation and implementation of risk-based prudential regulations.

The meeting emphasized important steps taken by the Central Bank of Somalia (CBS) in advancing institutional reforms to address laundering and financing of terrorism risks, including the new Targeted Financial Sanctions Law.

During the review meeting, the Somali government has made a formal request for continuous IMF-support program, to sustain the progress achieved strengthen economic institutions and macroeconomic stability and inclusive economic growth.

By July 2023, the agreements for debt relief, which include all Paris Club creditors, the Kuwait Fund for Arab Economic Development, and the Saudi Fund for Development, have been signed and collectively account for 76.8% of the net present value of the remaining debt after conventional debt relief measures.

Discussions on this request are progressively ongoing with key focus on strengthening domestic revenue, public financial management, financial deepening and financial inclusion, governance, and statistics.

Just a month ago, Somalia received a huge boost in debt relief with a $75 million grant from the World Bank, aimed at strengthening efforts to build robust institutions.

The government of Russia also signed an agreement in Saint Petersburg, exempting $640 million of debt relief for the Federal Government of Somalia.

On March 25, 2020, the executive boards of the International Monetary Fund and the International Development Bank (IDA) agreed that Somalia had met the requirements for debt relief under the HIPC initiative after meeting the three-year deadline set in 2018.

These debt reliefs are huge achievement towards implementing potential reforms to build functional institutions, attract investments and achieve economic growth.

Despite facing several challenges, Somalia has managed to maintain macroeconomic stability. The country’s institutional reforms and strengthened financial systems have played a vital role in its journey towards debt relief, which will clear the loans contracted during the pre-civil war era.