December 18, 2020
File – Somali currency now has buying power to grow the country’s economy. Photograph: Feisal Omar/Reuters
By The Government of Norway
‘By waiving Somalia’s debt to Norway, we are promoting sustainable development, stability and poverty reduction in one of the world’s most vulnerable countries,’ said Minister of Foreign Affairs Ine Eriksen Søreide.
Under a bilateral agreement between Norway and Somalia, NOK 16.2 million of Somalia’s debt to Norway will be cancelled. Some 67 % of Somalia’s debt to Norway, NOK 10.85 million, will be cancelled upon the signing of the bilateral agreement, in line with the Paris Club agreement with Somalia. The remaining NOK 5.35 million will be cancelled if and when Somalia reaches its Completion Point under the Heavily Indebted Poor Countries (HIPC) Initiative. It is expected to do so in 2023.
In order to reach its HIPC Completion Point, Somalia will have to implement a number of economic measures and reforms, so that the remainder of its debt to the Paris Club creditor countries can be cancelled. In the meantime, Somalia’s debt service obligations will be very low.
In March, Norway provided a short-term bridging loan of NOK 3.4 billion to Somalia to clear Somalia’s debt arrears to the World Bank’s International Development Association (IDA). The bridging loan, which was repaid the same day, was part of a multilateral, coordinated process that helped enable Somalia to qualify for debt relief under the HIPC Initiative and re-establish access to loans from the multilateral financial institutions and development banks. The International Monetary Fund (IMF) and IDA announced on 25 March that Somalia had reached its HIPC Decision Point, making it eligible to receive debt relief under the enhanced HIPC Initiative.
‘By providing the bridging loan, Norway helped Somalia to normalise its relations with the international financial institutions. I am proud that Norway has played a key role in this process, which shows what can be achieved when partner countries, donors and multilateral institutions work together,’ said Minister of International Development Dag-Inge Ulstein.
Under the HIPC initiative, low-income countries are granted debt relief on debt owed to the Paris Club creditor countries, as well as to the World Bank’s International Development Association (IDA) and the African Development Bank’s African Development Fund (ADF), provided that they implement agreed reforms in a satisfactory manner.
The Government of Norway | Published: December 16, 2020