In a landmark move to support Somalia’s economic recovery, the United States has agreed to forgive $1.1 billion of Somalia’s debt, a significant portion of the country’s total debt. This decision, announced in Mogadishu, is part of a broader international initiative to alleviate Somalia’s long-standing debt crisis, which has hindered the nation’s growth and development.
The bulk of Somalia’s debt originated during the military regime of Siad Barre, whose government collapsed in the early 1990s, plunging the country into civil war and economic decline. President Hassan Sheikh Mohamud referred to the debt as a “huge weight” on Somalia, made worse by years of political instability and turmoil.
The debt cancellation agreement was formally signed in Mogadishu by Somalia’s finance minister, Bihi Egeh, and U.S. Ambassador Richard Riley. Minister Egeh expressed his appreciation, thanking both the U.S. government and its people for their ongoing support of Somalia’s economic reforms and growth. Mohamed Shire, a senior Somali official, described the agreement as a “historic” step forward in Somalia’s recovery efforts.
This move is part of the Heavily Indebted Poor Countries (HIPC) Initiative, led by the International Monetary Fund (IMF) and the World Bank, which helps the world’s poorest nations reduce their unmanageable debt levels. Somalia completed the HIPC program in December 2023, which paved the way for up to $4.5 billion in debt forgiveness and reestablished the country’s ties with international financial institutions after years of isolation.
Ambassador Riley celebrated the agreement as a “great day” for both nations, emphasizing that the U.S. had been Somalia’s largest bilateral creditor, holding about 20% of the country’s total debt as of 2018. He commended Somalia for its ongoing economic reforms, improved financial accountability, and progress toward fiscal sustainability.
The U.S. debt cancellation follows similar actions from other creditors. In March, the Paris Club, a group of wealthy creditor nations, forgave 99% of the $2 billion Somalia owed to its members. This debt relief helped reduce Somalia’s debt-to-GDP ratio from 64% in 2018 to under 6% by the end of 2023, according to the World Bank. Additionally, in June, the OPEC Fund for International Development forgave $36 million in Somali debt, aided by a bridging loan from Saudi Arabia. These agreements have provided Somalia with new resources for national development.
Despite this progress, experts caution that private creditors may still perceive Somalia as a high-risk borrower due to ongoing concerns about political instability and governance. However, Harry Verhoeven, an expert on the political economy of the Horn of Africa, called the debt forgiveness “meaningful,” noting that it will enable Somalia to access more financing from multilateral development banks.
With the country’s debt burden significantly reduced, Somalia’s leaders are hopeful about creating a more stable and prosperous economic future.
