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debt

Paris Club agrees to cancel over $2bn Somali debt

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Mogadishu, March 14, 2024: The Paris Club has agreed to cancel more than two billion dollars debt Somalia owed its members, to help the East African country restore its debt sustainability

According to a statement issued on Wednesday, the debt relief represents 99 per cent of the debt Somalia owed to Paris Club members as of January 2023.

The Paris Club is an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations.

“Creditors welcomed and supported the commitment of Somalia to seek a treatment at least as favourable from all its other official bilateral and external commercial creditors,” read the statement.

It said the decision was made after a meeting on Wednesday between representatives of the Paris Club creditor countries and the Somali government.

The decision made, followed its Completion Point under the Enhanced Heavily Indebted Poor Countries (Enhanced HIPC) Initiative approval by the International Monetary Fund (IMF) in December 2023.

Reaching Completion Points means Somalia implemented reforms agreed to when the country became eligible for debt relief and also fully normalised its relations with international financial institutions.

The Paris Club creditors committed to cancel 1.2 billion dollars in nominal terms under the Enhanced HIPC Initiative framework to contribute to restoring the debt sustainability of Somalia, the statement said.

Paris Club creditors confirmed their willingness to grant additional debt cancellation on a voluntary and bilateral basis for 815 million dollars, the statement added.

imfund

IMF mulls granting Somali full debt relief in December

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Somalia is on course to receive a full debt relief from the International Monetary Fund (IMF) and other lenders in December this year.

The special treat is coming after making important reforms to boost domestic revenue collection and transparency in management of public finances.

After the latest review of Somalia’s performance under the Extended Credit Facility arrangement, the lender said the Horn of Africa country has made significant progress in implementing recommended reforms meant to rebound the economy, despite facing multiple headwinds.

“The reforms, which are supposed to ensure good use of public resources to maximally benefit the Somali citizens, and to boost economic growth, which in turn is expected to enable the creation of more job opportunities, are already bearing fruits,” the lender said.

This is despite the country grappling with drought, floods, food insecurity, subdued remittances, and volatile security situation in some parts of the country, which have weighed down economic performance.

Laura Jaramillo, who led the IMF staff, said the challenge notwithstanding, Somalia has met nearly all the conditions needed to qualify for the full debt relief and lenders have already agreed to remission of up to 76.8 percent of Somalia’s total debt, but more needs to be done.

 “Building on progress so far, key policy priorities would be to continue strengthening domestic revenue, public financial management, financial deepening and financial inclusion, governance, and statistics,” Ms Jaramillo said in a statement after meeting the Somali finance minister and the governor of the Central Bank of Somalia.

“Timely financing and capacity development support from development partners is essential for the successful implementation of the authorities’ reform strategy.”

The full debt relief will drop Somalia’s loan burden to $557 million – about 10 percent of its gross domestic product – from the current $3.3 billion, allowing it headroom to better deal with multiple issues slowing economic growth and development.

Somalia reached the decision point for IMF debt relief under the Heavily Indebted Poor Countries (HIPC) initiative in March 2020, allowing it to get partial debt relief, reducing its debt stock from $5.2 billion to $3.7 billion.

On reaching the completion point of the HIPC initiative, Somalia will get debt reliefs from the IMF, the World Bank, the African Development Bank, the Inter-American Bank and the 22 members of the Paris Club, alongside its other lenders who will volunteer to do so.

It will join – among other countries – Burundi, Rwanda, Tanzania, Uganda, Ethiopia and the Democratic Republic of Congo, which are currently among the 31 least developed countries that have received the relief.

The EastAfrican

Oil

Somalia rejects Genel Energy’s “illegal claim” to oil permits in Somaliland

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Somalia has rejected what it called an “illegal claim” by Genel Energy to oil exploration and exploitation rights in the country’s northern breakaway region of Somaliland, the country’s oil ministry said.

Somaliland claimed independence from Somalia in 1991 and has been largely peaceful while the rest of the country has grappled with three decades of civil war, but its leadership has failed to gain widespread international recognition.

In a statement, Somalia’s oil ministry said it “categorically rejects Genel Energy plc’s claim to own petroleum rights in Somalia’s northern regions and calls upon Genel Energy plc to cease its illegal claim to own petroleum rights.”

The oil ministry said it was the only institution legally authorised to grant permits in Somalia.

“Any authorisation granted in violation of Somalia’s laws and regulations is unlawful and would be considered null and void,” the oil ministry said.

Genel Energy and Somaliland officials did not immediately respond to requests for comment.

The company, which is listed on the London Stock Exchange, added Somaliland to its exploration portfolio in 2012, and signed a farm-out agreement with OPIC Somaliland Corporation for a block on the Ethiopian border last year, according to its website.

Earlier this month Genel said its geotechnical survey in Somaliland was complete.

“This provides the data from which to plan the main civil engineering work, set to commence in the new year,” it wrote on Twitter on Dec. 15.

Hydrocarbon discoveries in Uganda and Kenya and huge gas finds in Mozambique and Tanzania has stoked investor interest in other parts of East Africa’s hydrocarbon potential.

In October, Somalia signed a petroleum exploration agreement for seven offshore blocks with United States-based Coastline Exploration.

The East African