AfDB grants full debt relief to Somalia after decades of economic turmoil
Somalia qualified for the relief after demonstrating strong macroeconomic reforms and improvements in governance, public financial management and domestic revenue mobilisation.
The African Development Bank Group (AfDB) has approved full debt relief for Somalia, marking a major step in the country’s recovery efforts after decades of conflict and economic instability.
Under the approval, the Bank will cancel all African Development Fund loans owed by Somalia for the 2024 - 2039 period, amounting to $17.68 million (Sh2.3 billion).
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The decision follows Somalia’s successful completion of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, a rigorous global framework designed to help the world’s poorest nations eliminate unsustainable debt loads.
The relief will significantly reduce the country’s external debt burden and free up government resources for public investment.
Notably, the move builds on the multilateral debt relief architecture launched in 1996 under HIPC and expanded in 2005 through the Multilateral Debt Relief Initiative (MDRI), which provides 100 per cent cancellation of eligible debt from the IMF, World Bank and African Development Fund.
Somalia qualified for the relief after demonstrating strong macroeconomic reforms and improvements in governance, public financial management and domestic revenue mobilisation.
The lender says the country also fulfilled its poverty reduction commitments, particularly through expanding safety nets and improving the delivery of basic services to vulnerable communities.
These achievements were key benchmarks required to reach the HIPC completion point.
“Somalia has earned this moment through determination and discipline,” said Bubacarr Sankareh, the Bank Group’s Lead Operations Advisor for Somalia.
“Debt relief opens the door for stronger institutions, better services and brighter prospects for Somali citizens with impacts felt in classrooms, clinics, farms and markets across the country.”
With the debt relief now approved, the Somali government is expected to channel funds previously earmarked for debt servicing into priority areas such as public services, infrastructure rehabilitation and essential social programmes.
The freed-up resources will also support teacher recruitment, expand access to clean water and accelerate the restoration of health systems, particularly in regions recovering from drought and insecurity.
Nevertheless, the lender says the move is expected to boost Somalia’s creditworthiness and restore confidence among development partners, paving the way for increased concessional financing.
“With debt vulnerabilities sharply reduced, the government can now advance key national priorities, including its National Transformation Plan (NTP-1) and the transition from humanitarian response to durable, state-led development,” the lender said.
In March 2020, Somalia successfully cleared arrears to the Bank Group estimated at $122.6 million.
Consequently, the country pursued a set of reforms aimed at completing the HIPC process.
The country’s realisation of the HIPC completion point in December 2023 signalled that multilateral creditors, including the AfDB, IMF and IDA, would provide the full share of debt relief, which would reduce Somalia’s overall external debt from $5.2 billion (Sh675 billion) in 2018 to $557 million (Sh72.3 billion) after full delivery.
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