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Friday, December 9, 2022

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    IMF reaches staff agreement with Somalia, eyes debt forgiveness in late 2023

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    The head of the IMF mission told Reuters that on Monday, IMF staff members and Somalia reached a staff-level agreement that will enable the release of about $10 million to the East African nation, once approved by the board.

    The agreement was reached following an in-person review of Somalia’s Extended Credit Facility in Nairobi, Kenya, according to IMF mission chief Laura Jaramillo. She commended the government for pursuing economic reforms despite a protracted drought, the effects of Russia’s conflict in Ukraine, and ongoing security worries.

     

    Early in December, the IMF board is anticipated to review the staff-level agreement, according to Jaramillo.

    By the end of 2023, if Somalia keeps up its steady reform-related progress, it may have completed the HIPC global debt forgiveness process, allowing it to reduce its outstanding debt from $5.2 billion to about $550 million, according to Jaramillo.

    She noted that it would lower Somalia’s debt from its current level of around 90% to about 7% of its gross domestic product, calling it “a tremendous milestone.”

    Additionally, it would make new financial avenues available to Somalia, which would be very beneficial as the nation works to implement development plans and foster economic growth. A key component of the nation’s economic reforms would be to increase domestic revenue, including through better sales tax collection.

    If Somalia maintains its steady reform-related advancement, by the end of 2023 it may have finished the HIPC global debt forgiveness process, enabling it to lower its outstanding debt from $5.2 billion to roughly $550 million.

    She called it “a tremendous milestone” and mentioned that it would reduce Somalia’s debt from its present level of about 90% to about 7% of its GDP.

    Additionally, it would open up new financial options for Somalia, which would be very advantageous as the country works to put development plans into action and promote economic growth. Increasing domestic revenue, including through better sales tax collection, would be a crucial part of the country’s economic reforms.

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