WASHINGTON (Reuters) – The International Monetary Fund’s executive board has approved a financing plan that will help the IMF cover its share of debt relief for Somalia, IMF Managing Director Kristalina Georgieva said in a statement on Wednesday.
The financing plan includes cash grants from member countries and IMF internal resources, she said, without providing any further details of the financing package. Those funds will be used to clear Somalia’s arrears to the IMF.
“This marks a critical step in helping Somalia advance the process of normalizing relations with the international community and making progress toward achieving debt relief under the Heavily-Indebted Poor Country (HIPC) initiative,” Georgieva said.
A decision unlocking debt relief could come as soon as members provided the necessary financial commitments, assuming Somalia’s government continued its strong reform efforts, she added, without giving a specific date.
The African nation has about $5 billion in external debt, accounting for about 100% of its GDP, which the Fund has declared to be unsustainable.
Somali’s finance minister, Abdirahman Duale Beileh, welcomed the news in a posting on Twitter, adding, “We are grateful to all partners for their continued support in our journey to debt cancellation. We will march on with economic reforms.”
Beileh in October cited positive discussions with the United States, Somalia’s biggest creditor, Britain and others during the IMF/World Bank annual meetings, and said he expected a decision in favor of debt relief in February.
Georgieva on Wednesday described debt relief for Somalia was as a priority for the Fund and said she was encouraged by the support of IMF members on the issue.
Debt relief would “help unlock significant new financial resources to address Somalia’s large development needs and poverty reduction,” she said.