The International Monetary Fund logo is seen during the IMF/World Bank spring meetings in Washington. Picture: Reuters/Yuri Gripas

Johannesburg - The International Monetary Fund (IMF) and World Bank have said that Somalia is eligible for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) initiative. 

The decision was described as an "important step" to seeing Somalia's US$5.3 billion (as of 2018) debt being forgiven. 

The boards of the global organisations on Thursday commended the country's "sustained commitment to economic and institutional reforms under challenging circumstances" and agreed that Somalia was eligible for HIPC assistance based on a preliminary assessment. 

IMF managing director and acting chair, Kristalina Georgieva 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 programmes 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 endeavour."

The World Bank group president, David Malpass, congratulated Somalia "for embracing important reforms that can do much to encourage sustainable poverty reduction".

"I thank our international partners who have worked with us to bring Somalia to this important stage. Today was an important step towards Somalia resuming financing from international financial institutions, including the International Development Agency (IDA), our fund for the poorest countries."

"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,"said Malpass.

To get to the point of actual debt relief, the country's performance under the IMF's Staff-Monitored Program (SMP) would need to be "confirmed as satisfactory", said the boards. 

The country's arrears to multilateral creditors would also need to be cleared, or a strategy agreed upon on how to clear them. The operation for clearing of arrears is expected to be presented by the World Bank to the IDA by the end of February. 

Once Somalia has reached the completion point, it would qualify for unconditional debt relief under the HIPC initiative, and 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 were also expected to provide further beyond-HIPC assistance at the completion point, said the boards.

African News Agency (ANA)