US cancels $1.1B of Somalia’s debt in landmark financial agreement
Students wave a Somali in Mogadishu, Somalia (AFP Photo)
The United States has canceled $1.1 billion of Somalia’s debt in a historic financial agreement aimed at supporting the country’s economic recovery.
The debt cancellation represents a quarter of Somalia’s remaining debt. It is part of a broader international effort to relieve Somalia from the financial burden accumulated during the Siad Barre military regime.
Somalia’s economic burden eased by US debt cancellation
The announcement came after signing a formal agreement between US and Somali officials. Somalia’s Finance Minister Bihi Egeh expressed gratitude, acknowledging the U.S. government’s support for Somalia’s economic reforms.
This follows the successful debt relief process and the Paris Club agreement of March this year, which supported debt cancellation for Somalia. I thank the U.S. government and people for their unwavering support of our economic reforms and growth.
Somalia Finance Minister Bihi Egeh
According to Egeh, the debt relief will bolster Somalia’s path toward sustainable economic growth by removing financial constraints.
Somalia’s President Hassan Sheikh Mohamud emphasized the significance of the relief, noting that the country had been “suffocating under the huge weight of unsustainable debt” since the collapse of the state in the early 1990s.
Debt relief part of broader ‘Heavily Indebted Poor Countries’ initiative
Debt forgiveness forms a key element of the Heavily Indebted Poor Countries (HIPC) Initiative, a World Bank and IMF-led program targeting unsustainable debt in low-income countries.
The HIPC Initiative has allowed Somalia to normalize relations with international financial institutions and access new resources for development.
The debt relief efforts extend beyond the United States. In March, the Paris Club, a group of creditor countries, canceled 99% of the $2 billion that Somalia owed its members. This was followed by a $36 million cancellation from the OPEC Fund for International Development with support from Saudi Arabia.
Economic reforms unlock future development opportunities
US Ambassador Richard Riley praised the agreement as a milestone in Somalia’s journey toward economic resilience. He noted that with debt relief, Somalia would gain access to financing from multilateral banks and institutions, essential for its development.
Harry Verhoeven, a political economy expert, highlighted that debt relief enables Somalia to more easily access public financing. However, he noted that private investors might remain cautious because of concerns over governance and stability.
Ambassador Riley and Minister of Finance, Bihi Egeh, signed a bilateral agreement that forgives Somalia’s $1.14 billion debt to the United States.
This $1.1 billion in debt relief is in addition to the $1.2 billion of development, economic, security, and humanitarian assistance the United States has provided to Somalia just this fiscal year.
The United States continues to be a steadfast partner in support of the people of Somalia.
U.S. Somalia Embassy
US Navy F/A-18 fighter jet downed by ‘friendly fire’ incident over Red Sea
US confirms airstrikes in Yemen capital Sanaa targeting Houthi missile facilities
Turkish market sets sight on CBRT’s expected interest cut in December
