Paris Club creditors cancel $2bn of Somali debt

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Paris Club creditors cancel $2bn of Somali debt

9:40 CAT | 14 Mar 2024

Finance Minister Bihi Egeh says the debt relief will help transform Somalia's future [Image: @BihiEgeh/X]

Several countries have agreed to cancel more than $2bn (£1.5bn) of debt owed to them by Somalia.

The Paris Club which includes the US, Japan and Russia wrote off almost all the money it was owed after Somalia reached the end of a debt forgiveness initiative overseen by the International Monetary Fund and World Bank.

Somalia has in turn committed to prioritise poverty reduction by investing in health, education and basic infrastructure.

“Achieving full debt relief will transform Somalia’s future and allow our government to create fiscal space for basic public services,” Finance Minister Bihi Egeh shared on X, formerly Twitter.

Somalia’s conclusion of the IMF and World Bank Enhanced Heavily Indebted Poor Countries (HIPC) debt forgiveness initiative last December made the country eligible for $4.5bn ($3.5bn) worth of debt forgiveness.

Achieving the full $4.5bn debt relief will slash the country’s external debt from 64% of its GDP in 2018 to just 6%.

Somalia had been exiled from the global financial system for more than three decades following years of civil war and militant threats.

After thorough negotiations in Paris today, I am grateful to the Paris Club creditors for principally agreeing to full debt cancellation for #Somalia. Following this historic step, we look forward to bilaterally signing agreements with individual creditors to finalise the process pic.twitter.com/lwVsPI8psg

— Bihi Egeh (@BihiEgeh) March 13, 2024