Russia: Agreement waving the debt owed by Somalia

Mogadishu (HAN) Febuary 27th, 2024 – Regional Financial security initiatives – The Russian Federation led by President Putin,  off the debts of Somalia’s current government worth more than $684 million. Somalia’s Finance Minister, Bihi Iman Egeh, and Russian Deputy Finance Minister, Timur Igorevich Maksimov, have jointly inked an agreement waving the debt owed by Somalia after a meeting by the officials from the two countries.

The current government leadership in Somaliaare struggling to convince the international community, including the files of former Soviet Union to accept its debt relief bid, led by president Hassan Sheekh Mahmoud and his current finance minister Mr. Bihi. Early this year, the International Monetary Fund (IMF) said Somalia would be eligible for full debt relief from IMF and other multilateral lenders by the end of this year as reforms to boost revenue collection and fiscal transparency begin to bear fruit. Somalia reached the decision point for IMF debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative in March 2020. Somalia’s debt was reduced to US$3.7 billion from the US$5.2 billion it had accumulated by December 2018. The lender said the full debt relief would reduce Somalia’s debt to US$557 million, about 10 percent of its gross domestic product, allowing it headroom to address multiple shocks affecting its economic growth and development.

The Somali legislature has also passed multiple laws that are part of the structural reforms the lender had called for earlier, which will expand the country’s tax base and improve oversight of public spending and procurement. But despite the progress, the prolonged drought that has put nearly half the population at risk of food insecurity in the country as well as a slowdown in global growth, continue to weigh down on economic activity. In July last year, Somalia received a US$100 billion grant from the World Bank to help with the reforms to reach the completion point for debt relief under the HIPC initiative as well as respond to the immediate drought situation. Sources HAN and Halbeeg.