The African Development Bank Group has approved additional debt relief for Somalia, clearing the way for full cancellation of all African Development Fund loans to the country covering the 2024-2039 period.
The move, which follows successful completion of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative process, will reduce Somalia's external debt by $17.68 million, freeing up vital fiscal space for development priorities.
Launched in 1996 by the World Bank Group, HIPC works to reduce unmanageable debt burdens for participating countries that meet strict criteria and commit to poverty reduction policies, enabling them to focus on economic growth and poverty reduction. In 2005, the Multilateral Debt Relief Initiative (MDRI) enhanced HIPC by providing 100 percent relief on eligible debts from the IMF, World Bank, and African Development Fund.
The approval follows Somalia's strong progress on macroeconomic reforms, public financial management, domestic revenue mobilisation, and governance. The country also met its poverty reduction commitments by improving basic service delivery and expanding safety nets for vulnerable households.
"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."
The government is expected now to reallocate resources to fund public services, infrastructure rehabilitation, and essential social programs. Funds will also be used to expand teacher recruitment, support clean water access, and accelerate health system restoration in regions affected by drought and conflict. Debt relief will also reinforce economic resilience.
The move will also strengthen Somalia's creditworthiness, restore confidence among development partners, and unlock concessional financing for long-term reconstruction. With debt vulnerabilities sharply reduced, the government can now advance key national priorities, including its National Transformation Plan (NTP-1) and the transition from humanitarian response to durable, state-led development.
In March 2020, Somalia successfully cleared arrears to the Bank Group estimated at $122.6 million. Consequently, the country pursued a set of reforms aimed at completing HIPC process. Somalia's realisation of the HIPC completion point in December 2023 signalled multilateral creditors including the AfDB, IMF and IDA to provide the full share of debt relief which would reduce Somali's overall external debt from $5.2 billion in 2018 to $557 million after full delivery.
