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16 Mar, 2024 08:40

African nation has $2bn debt canceled

The so-called Paris Club has agreed to write off sums owed by Somalia
African nation has $2bn debt canceled

The Paris Club group of creditors, which includes Russia, the US, and a number of other leading global economies, has agreed to cancel $2 billion in debt owed by Somalia, it was announced on Wednesday.  

The group will write off 99% of the money owed by the African country after it concluded a debt forgiveness program supervised by the International Monetary Fund and World Bank. 

The Paris Club of creditors is also comprised of Belgium, Denmark, France, Germany, Italy, the Netherlands, Japan, the UK, Norway and Spain.  

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

Somalia has pledged to reduce poverty through investments in healthcare, education, and basic infrastructure. 

The debt cancellation agreement is a “big milestone in the country’s journey to financial recovery,” Information Minister Daud Aweis stated.  

In December, Somalia became eligible for debt relief under the Heavily Indebted Poor Countries Initiative (HIPC), meaning it qualified to receive up to $4.5 billion.

Most of Somalia’s debt was amassed during the years of Siad Barre’s military rule, which came to an end in 1991. Interest had since accrued on the loans issued during that period. 

Somalia was thrown into civil war in 2009 after clashes between government forces assisted by African Union peacekeeping troops and al-Qaeda-aligned al-Shabaab militants. 

In 2022, Somali government forces, aided by airstrikes from the US and African Union troops, conducted major offensives against al-Shabaab, reclaiming significant areas previously held by the group. However, the conflict continues. 

The World Health Organization (WHO) has reported that the “conflict and insecurity in Somalia have hampered development in recent years.” 

Millions of people are in a danger of severe malnutrition due to famine in the country and disease outbreaks like cholera and measles, according to WHO report.

Meanwhile, Russia donated 50,000 tons of grain to Somalia last month under the humanitarian initiative, following the decision made by Russian President Vladimir Putin last year, during the second Russia-Africa summit in St. Petersburg in July 2023. 200,000 tons of free wheat were delivered to Burkina Faso, Zimbabwe, Mali, Somalia, Chad, and Eritrea.

The Paris Club was established in 1956 and is currently a 22-member group of official creditors responsible for finding coordinated and sustainable solutions to payment difficulties experienced by debtor countries.