US cancels $1.14 billion of Somalia's debt as part of major relief efforts

This announcement, made on Tuesday, November 5, coincides with Somalia's recent approval of a $1.36 billion national budget for 2025.

Somali Finance Minister Bihi Egeh and US Ambassador Richard Riley formalised the debt relief agreement in Mogadishu. Egeh shared the news on X (formerly Twitter), stating, “The American government debt totalling over $1.14 billion was forgiven today by the United States government,” crediting both recent debt relief processes and the March Paris Club agreement as catalysts for this move.

Ambassador Riley hailed the agreement as a “great day,” noting that this US debt cancellation represented “the largest single component of a total of $4.5 billion in debt owed to multiple countries that were forgiven” under a broader World Bank and International Monetary Fund (IMF) debt relief deal for Somalia. The arrangement is part of the Heavily Indebted Poor Countries (HIPC) Initiative, which was established to help the world’s most financially burdened nations in December 2023.

Somalia’s economy has faced severe challenges, including decades of civil war, violent insurgencies led by the al-Qaeda-linked jihadist group al-Shabab, and recurring climate-related disasters. As of 2022, approximately 54% of Somalia’s population lived below the poverty line, with urban areas bearing the brunt of these economic struggles due to high urbanisation rates.

Despite these obstacles, Somalia has been making strides in economic reform, maintaining a solid track record of macroeconomic management. The IMF praised Somalia’s consistent implementation of the Extended Credit Facility (ECF) programme, which began in January 2024 as a new three-year arrangement aimed at supporting Somalia’s post-HIPC economic goals. The IMF's Executive Board completed its first review of this programme in June 2024.