IMF and World Bank Consider Somalia Eligible for Assistance Under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative

IMF News, February 13, 2020

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The Executive Boards of the International Monetary Fund (IMF) and World Bank met on February 12 and 13, 2020, respectively, to consider Somalia’s eligibility for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative.
Based on a preliminary assessment, the Executive Boards agreed that Somalia is eligible for assistance under the Enhanced HIPC Initiative.
The Boards commended the authorities’ sustained commitment to economic and institutional reforms under challenging circumstances.

Somalia’s debt measured US$5.3 billion at the end of 2018.
Press Release No. 20/48 is associated with this announcement.
To date, 36 countries have reached both their Decision Points and Completion Points under the Enhanced HIPC initiative.

Kristalina Georgieva, Managing Director and Acting Chair of the IMF, following the IMF Executive Board discussion on February 12, 2020, said:
- "Today’s agreement by the IMF Executive Board that Somalia can be eligible for debt relief under the Enhanced HIPC Initiative marks a historic moment. It provides a clear recognition of Somalia’s sustained commitment to key economic and financial reforms under consecutive staff-monitored programs with the IMF. Helping Somalia achieve debt relief and unlock access to the needed resources to increase growth and reduce poverty is a key priority for the IMF. I am very grateful to our members for all their support in this endeavor."
David Malpass, World Bank Group President, following the World Bank Executive Board discussion on February 13, 2020, said:
- “Today was an important step towards Somalia resuming financing from international financial institutions, including IDA, our fund for the poorest countries. I congratulate Somalia for embracing important reforms that can do much to encourage sustainable poverty reduction, and I thank our international partners who have worked with us to bring Somalia to this important stage. We are glad to have worked closely with the Federal Government of Somalia in assisting their progress over the past few years and look forward to opportunities for greater World Bank Group support for the Somali people.”

Conditions to complete the journey to the HIPC Decision Point:
- Somalia’s performance under the current IMF Staff-Monitored Program (SMP) must be confirmed as satisfactory.
- The authorities must either clear their arrears to multilateral creditors or agree a strategy to clear them.
Operational timelines and actions:
- World Bank staff expect to present the operation for clearing the arrears to the International Development Association (IDA) by the end of February 2020.
- Agreement on the reforms Somalia will need to implement to reach the Completion Point—the floating Completion Point triggers—will need to be finalized taking account of the views expressed by the Executive Boards.
- Prompt action on these items could result in Somalia reaching the Decision Point by the end of March 2020.
Outcomes at Completion Point:
- Once Somalia has reached the Completion Point, it would qualify for unconditional debt relief under the HIPC Initiative.
- Somalia would also qualify for debt relief under the Multilateral Debt Relief Initiative (MDRI) from the World Bank's IDA and the African Development Fund (AfDF), together with beyond-HIPC assistance from the IMF.
- Paris Club creditors are also expected to provide further beyond-HIPC assistance at the Completion Point.

The HIPC Initiative is a framework created by the IMF and World Bank in which all creditors, including multilateral creditors, provide debt relief to the world's poorest and most heavily indebted countries.
The Initiative aims to reduce the constraints on economic growth and poverty reduction imposed by the debt-service burden.

IMF and World Bank press release (Press Release No. 20/48), February 13, 2020.