Somalia has cleared loan arrears owed to the African Development Bank Group, the lender said in a statement on its website this week. Coming weeks after settling its debt to the World Bank, this development marks another milestone in the war-torn country’s bid for re-engagement with the international lending community.
The arrears were cleared following the full payment of $122.55 million by the United Kingdom government and the European Union, marking the end of sanctions and the resumption of full re-engagement between the regional development bank and Somalia, AfDB said.
“The settlement of the arrears of Somalia to the African Development Bank is a new beginning for us in Somalia,” finance minister Abdirahman Beileh said. “We stuck with our reforms, we were persistent, and it has paid off.”
The reform programme, which began some years back with help from the International Monetary Fund, saw a high level of political commitment and consistent engagement by Somali President Abdullahi Mohamed, and Prime Minister Hassan Ali Khayre, the AfDB said.
Significant progress in the implementation of reforms has given confidence to international financial institutions. On Wednesday, the World Bank and IMF said Somalia was close to getting debt relief which, according to the Fund and the Bank’s International Development Association, will allow the country to reduce its $5.2 billion in external debt to around $557 million and immediately normalize its relations with the world after 30 years outside the international financial system.
“I commend the government of Somalia for their diligence in implementing reforms… Together, we got it done for the people of Somalia,” the bank’s President Akinwumi Adesina said, describing the arrears clearance as “a reflection of the power of partnerships and consensus-building.”
With an existing portfolio that totals $135 million across multiple sectors of the economy, AfDB will now immediately provide a new policy-based operation to help boost economic growth and accelerated the development of Somalia, it said.
The decision by the global lenders and the clearance of arrears to AfDB comes at a crucial time for Somalia, a country with 15 million people currently grappling with the coronavirus outbreak, a swarm of desert locust and is preparing for elections later this year.
While Somalia’s Paris Club creditors – the United States, Russia, Italy, and France – are expected to make a decision on debt relief for the country by the end of this month, according to a joint statement from them, the notable progress so far points to a bright future for Mogadishu.
Successfully normalizing relations with the international community means Somalia will get renewed access to critical additional financial resources to strengthen the economy, help improve social conditions, raise millions out of poverty, and generate sustainable employment for Somalis, the IMF and World Bank added.
