Abidjan (Somalia Today) — Somalia has secured full cancellation of its remaining African Development Fund debt, capping a long push to escape decades of arrears and debt distress.
The African Development Bank Group approved the final round of relief after Somalia reached the completion point of the Heavily Indebted Poor Countries (HIPC) Initiative, confirming that the country had met a demanding set of economic and governance reforms.
Under the decision, the Bank will cancel all African Development Fund repayments falling due between 2024 and 2039, erasing about $17.68 million in obligations and freeing scarce budget resources for basic services and reconstruction.
Combined with broader HIPC and Multilateral Debt Relief Initiative deals, the move helps drive Somalia’s external public debt down from roughly $5.2 billion in 2018 to an expected $557 million once all creditors deliver their share of relief.
Debt wipe and fiscal space
In a press release, the African Development Bank Group said the cancellation completes its share of multilateral relief under the enhanced HIPC and Multilateral Debt Relief Initiative frameworks.
For Mogadishu, the impact is concrete. Money that would have gone to servicing AfDB loans now flows into classrooms, clinics, water systems, and roads in regions hit by conflict and repeated drought.
“Somalia has earned this moment through determination and discipline,” said Bubacarr Sankareh, the Bank Group’s lead operations advisor for Somalia.
“Debt relief opens the door for stronger institutions, better services, and brighter prospects for Somali citizens with impacts felt in classrooms, clinics, farms, and markets across the country.”
Somali officials see the decision as a chance to move away from constant crisis management. Predictable savings on debt service should make it easier to plan multi-year programmes and co-finance projects with other development banks and donors.
Arrears to completion
The AfDB move also closes a chapter that began when much of the global financial system still shut Somalia out.
In March 2020, Somalia cleared about $122.6 million in arrears owed to the African Development Bank Group, using bridge financing from the United Kingdom and support from the European Union. The step allowed the Bank to resume full operations in Somalia under a special arrears-clearance framework.
Later that month, the IMF and World Bank determined that Somalia had reached the HIPC “decision point”, opening the way to staged debt relief as long as the authorities stuck to a strict reform programme.
According to a 2020 HIPC decision-point notice, the notice projected that full delivery of relief would cut Somalia’s external public debt, in net present value terms, from about $5.2 billion at end-2018 to about $557 million once the country reached the completion point.
Somalia crossed that milestone in December 2023, when the IMF and the World Bank’s International Development Association announced that the country had met 13 of 14 agreed “triggers” on public finance, revenue mobilisation, governance, social spending, and statistics.
An IMF–World Bank completion-point statement estimated total debt-service savings at around $4.5 billion over time.
Since then, Mogadishu has negotiated a series of bilateral restructuring and cancellation agreements.
In March 2024, the Paris Club of official creditors agreed to cancel $1.2 billion in claims under HIPC terms. It signalled further voluntary write-offs, bringing the group’s total reduction to more than $2.0 billion, or 99 percent of its exposure, according to a Paris Club statement.
Debt outlook
The AfDB cancellation is modest in headline dollar terms but important for Somalia’s debt ratios and its standing with lenders.
IMF and World Bank staff estimate that once HIPC, MDRI, and “beyond-HIPC” operations are fully delivered, Somalia’s external public debt will fall from about 64 percent of GDP in 2018 to roughly 6 percent of GDP at end-2023.
That shift moves the country from chronic debt distress to a low-risk category on most multilateral gauges, assuming reforms continue.
A lighter debt stock and a cleaner arrears record should, in turn, help Somalia secure new concessional loans and grants on softer terms. These include longer maturities, grace periods, and below-market interest rates that are better suited to a fragile, low-income economy still rebuilding state institutions.
For its part, the AfDB has already flagged Somalia as a priority country in its forthcoming 2025–2030 Country Strategy Paper and aligns it with the government’s long-term “Centennial Vision 2060” and its first National Transformation Plan.
The aim is to channel new financing into infrastructure, human capital, and climate resilience rather than short-term budget support.
For investors and development partners, the combination of lower debt, an IMF-backed programme under the Extended Credit Facility, and a clearer reform roadmap signals policy commitment, even as insecurity and climate shocks continue to weigh on the outlook.
Reform agenda
The debt relief is not a blank cheque. The relief remains explicitly tied to continued reform.
Under successive IMF arrangements and HIPC benchmarks, Somalia has started to raise domestic revenue, overhaul public financial management, modernise customs, and strengthen central bank operations.
Authorities have also tried to make the budget more transparent and to protect priority social spending.
Officials say the savings from cancelled AfDB debt will help fund the first phase of the National Transformation Plan (NTP-1), a five-year development roadmap that aims to shift Somalia from humanitarian response to state-led development.
The plan, covering 2025–2029, focuses on governance, economic diversification, social and human capital, and climate-resilient growth, according to the Ministry of Planning’s NTP overview.
Aligning external finance with the NTP and with a more formal debt-management framework, policymakers argue, should reduce the risk of a new build-up of unsustainable debt by forcing projects through a central pipeline and clearer appraisal process.
However, donors and economists warn that relief alone does not shield Somalia from shocks.
The country still depends heavily on grants and remittances. Tax collection from the non-aid economy remains narrow, while insecurity and climate volatility continue to disrupt trade corridors, agriculture, and pastoral livelihoods.
For now, Somali officials are stressing the immediate opportunity: a lighter debt-service bill for 2024–2039 and more room in the annual budget for teachers, health workers, water projects, and climate-resilient infrastructure.
