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International Partnerships

EU supports Somalia in reaching historic milestone towards debt relief

News 26 March 2020 Brussels

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The European Union today announced it will provide up to €43 million to help clear Somalia’s arrears to international financial institutions. This means Somalia becomes eligible for forgiveness of most its debt, measured at over US$5 billion, under the Heavily Indebted Poor Countries (HIPC) Initiative.  

We congratulate Somalia on reaching this historic milestone, and are proud to have continuously supported the country in this process. Somalia will now have access to significant new financial resources to address its development needs and help offer a brighter future to its youth. The European Union will continue to work closely with the Somali authorities and international partners to support Somalia on this path and in ensuring benefits for all Somalis”, Jutta Urpilainen, Commissioner for International Partnerships, stated on the occasion.

Somalia’s access to debt relief has been at the centre of the EU’s strategy in the country over the past three years. In October 2018, the EU and Somalia signed an agreement to provide €92 million to the Somali budget over two and a half years. This has been instrumental in helping Somalia build a track record of economic reforms and reach today’s milestone. Up to €43 million of these funds will now be used to cover the funding gaps to clear arrears held by the International Monetary Fund (IMF) and the African Development Bank.

With the clearance of its arrears, Somalia officially reaches the HIPC ‘decision point’, the first of two milestones necessary for debt relief. To get to this point, the country has also had to establish a track record of economic reforms and adopt a strategy for reducing poverty. Somalia will now be able to access significant new resources, such as funding from the World Bank’s International Development Association.

The second milestone will be the ‘completion point’, when most of Somalia’s debt is effectively pardoned. To reach this target, the country will have to show good performance under its IMF programme and implement key reforms along with a Poverty Reduction Strategy for at least one year.

Background information

The EU is one of Somalia's key development partners, having provided the country €286 million for the period 2014-2020 to support different areas such as stabilisation, state building, security, basic services and job creation. Additionally, the EU has also allocated Somalia €312 million through the Trust Fund for Africa.

Other EU initiatives aiming at improving stability in Somalia and developing the capacity of its government to ensure security over its territory include stabilisation activities under the Instrument contributing to Stability and Peace, the support to AMISOM under the African Peace Facility, and three Common Security and Defence Policy missions: EUCAP Somalia, EU Naval Force Atalanta, and EU Training Mission in Somalia.

On the HIPC initiative

Created by the IMF and World Bank, the HIPC Initiative allows creditors, including multilateral creditors, to provide debt relief to the world's poorest and most heavily indebted countries. To date, 36 countries have reached both their Decision Points and Completion Points under the Enhanced HIPC initiative.

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