The settlement of the arrears of Somalia to the African Development Bank is a new beginning for us in Somalia. We stuck with our reforms, we were persistent, and it has paid off,”H.E. Abdirahman D. Beileh, Minister of Finance of the Federal Republic of Somalia
As the year began and most countries made projections as to what 2020 had in store for them, Somalia was at the cusp of the thawing of one of the country’s greatest and most strategic relations: The World Bank Group Board of Executive Directors had just started the final steps towards normalizing its relations with the Federal Government of Somalia (FGS) after thirty years. This development is in a class of its own; incomparable to any yearly progress projection Somalia could have come up with. This is a game-changer.
Towards the end of February, a word from the officials at the World Bank indicated that based on Somalia’s improved political reforms, economic reforms, strong fiscal record and the country’s openness towards better and a more democratic governance system; ‘The World Bank was ready to provide the strongest possible support to Somalia’s efforts toward economic and social recovery.’
Soon after the country got into the good graces of the global lender, the International Monetary Fund (IMF) approved about $ 5 billion worth of assistance. This is a huge win for the country. But it didn’t come easy.
Somalia has been in the cold, unable to access credit from these major global financial players for nearly 30 years. What this means is that Somalia was out of the global economy and all the perks that come with it, such as being able to qualify for a debt relief program.
To make it to the table once again, Somalia had to put in place the needed structures as befitting the standards of all member nations: An inclusive economy, a transparent and democratic system of governance, better debt management programs.
What these developments mean for Somalia and the people of Somalia can be looked at from the simple and more immediate level of; ‘what will the people get?’ To a larger more complicated level of; ‘what is in it for Somalia?’
For the people, these developments are pretty straight forward. Since the government will now have access to more resources, the public should expect better and more reliable social services like access to medical care, a well-funded education sector, well-armed and properly remunerated disciplined forces, etc. For citizens who are businessmen… easier access to credit facilities.
As for the country, the benefits are something else entirely. For instance, the IMF and World Bank recently called for creditors to suspend debt repayments from the world’s 76 poorest countries to allow them to prepare for the challenges posed by Coronavirus. Somalia will benefit from this.
There is a major issue of debt clearance or debt reduction as part of debt relief initiatives. Through the heavily indebted poor countries initiative, Somalia’s debt will be reduced from $5.2bn to $557m over three years. At the same time, the United Kingdom and the European Union have also cleared arrears on loans amounting to $122.55 million that Somalia owed the African Development Bank (AfDB).
The two reliefs were among the first major respites for Somalia with the Minister of Finance Abdirahman Beileh claiming that these developments have now added fuel to the country’s economic engine that has been idle for decades.
“The settlement of the arrears of Somalia to the African Development Bank is a new beginning for us in Somalia. We stuck with our reforms, we were persistent, and it has paid off,” the minister was quoted in the joint stamen released by the Africa-based lender.
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