By: ThinkBusiness Africa
The African Development Bank Group (AfDB) has delivered a final decision approving the full cancellation of all outstanding African Development Fund (ADF) loans to Somalia; after the completion of Somalia’s journey through the poverty reduction program: Enhanced Heavily Indebted Poor Countries (HIPC) Initiative. AfDB said in a statement.
The approval, which clears debts covering the 2024 to 2039 period, signifies the full normalization of relations between Somalia and the AfDB Group and provides crucial fiscal space for the war-torn country to focus entirely on reconstruction and development.
The $17.68 million forgiveness is part of the larger, historic $4.5 billion debt relief package granted to Somalia by multilateral and bilateral creditors (AFDB,world bank) following its attainment of the HIPC Completion Point in December 2023.
AfDB stated that Somalia demonstrated strong commitment to structural reforms, meeting rigorous conditions across key areas including: Implementing reforms for greater budgetary transparency and accountability; Showing steady progress in managing its economy and boosting domestic revenue, and expanding social services and safety nets for vulnerable households.
The debt relief drastically reduces the East African nation’s external debt-to-GDP ratio from an unsustainable 64% in 2018 to less than 6% by the end of 2023.
The cancellation of this debt along with the broader relief package, means the government can redirect funds previously allocated to debt service towards essential public services: vital infrastructural developments, in roads and energy networks.
AfDB officials hailed the move as opening the door for “stronger institutions, better services, and brighter prospects for Somali citizens,” stating the impact will be felt “in classrooms, clinics, farms, and markets across the country.” said Bubacarr Sankareh, AFDB Lead Operations Advisor for Somalia.
Somalia successfully cleared $122.6 million arrears to the AfDB in March 2020. And completed its HIPC process in 2023 signaling to its multilateral creditors to release its full debt relief package which will see the country’s overall external debt drop drastically from $5.2 billion in 2018 to $557 million after full delivery.
The HIPC works to reduce unmanageable debt burdens for participating countries that meet strict criteria and commit to poverty reduction policies, enabling them to focus on economic growth and poverty reduction. It was first Launched in 1996 by the World Bank Group. #####
