The representatives of the Paris Club Creditors have agreed, together with the government of Somalia, to cancel 67% of the latter’s debt, translating to $1.4 billion.
This debt restructuring is per the Club’s Heavily Indebted Poor Countries (HIPC) initiative that seeks to provide interim debt relief to affected countries.
Therefore, no payments are expected from Somalia until at least 31st March 2024, as long as it continues to implement an IMF supported program satisfactorily.
According to the International Monetary Fund (IMF), several creditors are expected to grant Somalia additional debt relief on a bilateral basis, and it could eventually see 100% debt cancellation deals with some countries after it completes other steps under the Heavily Indebted Poor Countries (HIPC) Initiative in about three years.
The New York Times reports that Somalia is the 37th country to qualify for debt relief under the HIPC process and that with time, debt relief will help the country reduce its external debt to $557 million from $5.2 billion as at the end of 2018.
The Paris Club is a group of officials from significant creditor countries whose role is to find coordinated and sustainable solutions to the payment difficulties experienced by debtor countries. As debtor countries undertake reforms to stabilize and restore their macroeconomic and financial situation, Paris Club creditors provide an appropriate debt treatment.
It currently has 22 member states, including the U.S, U.K, France, Germany, and Russia.