The Government has proposed that Norway should provide a short-term bridging loan of NOK 3.135 billion to Somalia in 2020 to clear Somalia’s debt arrears to the World Bank’s International Development Association. Technically, this is a loan to Somalia, but the funds will be transferred to a World Bank account. The World Bank will then grant Somalia a new loan, which will be used immediately to repay the bridging loan from Norway.

Somalia and Prime Minister Hassan Ali Khaire get help to clear the country's debt. Here with Minister of Foreign Affairs Ine Eriksen Søreide. Credit: Svein Michelsen, MFA

‘Following several decades of civil war, the situation in Somalia has stabilised in the last few years. The authorities have implemented a number of important political and economic reforms, but the country is still in a vulnerable situation. This loan from Norway will be an important contribution to the work to promote reform and stabilisation in Somalia,’ said Minister of Foreign Affairs Ine Eriksen Søreide.

Somalia’s external debt amounts to approximately USD 4.7 billion, and debt cancellation is a key priority for the Somali Government. A third of the debt is owed to the multilateral development banks, the World Bank and the African Development Bank, and the International Monetary Fund (IMF). These debt arrears need to be cleared before Somalia can receive new loans and debt relief. In addition to the bridging loan from Norway, the UK will provide a bridging loan to cover Somalia’s debt to the African Development Bank. This means that Somalia just needs one more donor country to cover its debt to the IMF. When these three loans are in place, Somalia will qualify for debt relief under the Heavily Indebted Poor Countries (HIPC) Initiative, provided that it implements the ongoing programme of economic reforms agreed with the IMF.

‘Somalia’s debt arrears to Norway amount to NOK 16 million. If Somalia receives debt treatment in the Paris Club under the HIPC initiative, this debt will be cancelled,’ said Minister of International Development Dag-Inge Ulstein.

Mr Ulstein will participate in a roundtable meeting on Somalia during the World Bank’s Annual Meetings in Washington next week.

‘Debt relief is essential if Somalia is to continue its stabilisation and reform efforts. This bridging loan operation shows what we can achieve when donors and multilateral financial institutions work together. This will be a topic of discussion at a number of the meetings I’ll be having during the World Bank’s Annual Meetings next week. The aim is to carry out this bridging loan operation during the first quarter of 2020,’ Mr Ulstein said.

Somalia is an important partner country for Norway, and it received NOK 543 million in bilateral aid from Norway last year. Together with the EU, the UK and Germany, Norway has invested substantial resources in promoting institution-building, good governance and stabilisation in the country. Norway has contributed to efforts to promote peace and stabilisation in Somalia since the early 2000s.