The African Development Bank has endorsed Somalia's donor-supported plan to settle arrears it owes the lender, opening another chapter for possible infrastructure financing for the Horn of Africa country.
The move on Wednesday by the AfDB Board means Mogadishu can proceed to clear the arrears, supported by donors, worth $122.55 million; and pave the way for the Bank to start negotiating on project funding.
Known as the 'Framework for Somalia's Arrears Clearance', the Board of Directors for AfDB said on Wednesday it was endorsing the plan after Mogadishu secured sufficient support from donors to guarantee the clearance.
The AfDB, the World Bank, International Monetary Fund and the Arab Monetary Fund as the joint biggest multilateral creditors to Somalia, were owed $1.5 billion; $1.3 billion of which are in arrears for the last 30 years. Somalia's current total debt is $5.3 billion, according to the IMF.
The AfDB had suspended engagement with Somalia for most of its three decades of chaos and imposed sanctions against project financing as well as giving of loans or grants.
But Mogadishu's latest victory now adds to the recent decision by the World Bank and the IMF to grade Somalia as eligible for debt relief in a programme known as Heavily Indebted Poor Country (HIPC) Initiative. Both Institutions agreed Somalia had conducted significant economic reforms to merit the decision.
On Thursday, the Board of AfDB said in the Ivorian Capital Abidjan that it will resume normal cooperation with Somalia "as soon as it clears its arrears to the Bank Group."
Additional financial resources will be provided to support ongoing and new reforms necessary for Somalia to reach Completion Point under the Enhanced Heavily Indebted Poor Countries Initiative, a statement added.
"Difficulties cannot be allowed to exist forever, because it defeats the very purpose of why we are here to serve," AfDB president Akinwumi Adesina said after the approval.
"The sacrifices of the Somali people under the leadership of the Federal Government of Somalia during the implementation of difficult and wide-ranging reforms has been recognised by the wider international community."
Somalia Finance Minister of Somalia, Dr Abdirahman Beileh said his country will continue with reforms to be completely free in negotiating lending terms with financiers.
"We are committed to continuing our reforms as we have seen their benefits to our governance systems and capacity to manage our economy, and, more importantly, to improving government accountability to the people," he said.