Somalia Has Turned a Corner
Somalia's recent success in completing the IMF and World Bank's Heavily Indebted Poor Countries Initiative is a testament to the power of multilateralism. But the country still faces massive challenges that will require prudent domestic governance and ongoing support from regional and global actors.
CAIRO – On December 13, 2023, Somalia reached the completion point of the Heavily Indebted Poor Countries Initiative (HIPC), becoming the 37th country to benefit from the program. With the goal of ensuring manageable debt burdens for poor countries, the HIPC, established by the International Monetary Fund and the World Bank, offers debt relief to countries that will use the saved funds for programs to benefit the poor and drive progress toward achieving the Sustainable Development Goals (SDGs).
Somalia has been in arrears to bilateral and multilateral creditors since the collapse of the Somali Democratic Republic in 1991. But following the HIPC completion point, its external debt has declined from $5.2 billion at the end of 2018 to less than $600 million. The journey to this milestone has been difficult, marked by severe and prolonged drought, the COVID-19 pandemic, chronically limited fiscal capacity, weak institutions, and other significant challenges.
Somalia owes its achievement to extensive reforms aimed at enhancing domestic revenue, strengthening public-finance management, addressing governance weaknesses, and bolstering the central bank’s institutional and regulatory capabilities. Since 2013, successive governments, supported by IMF and World Bank programs, as well as by the African Development Bank, the European Union, and many other development partners, not only took ownership of the process, but also mobilized the public and key leaders in its favor.