(3 minutes read)
· The Paris Club of creditor countries are restructuring
Somalia’s external public debt by cancelling a large quantum of debt-
to the extent of US$1.4 billion.
· The agreement between Somalia and the Paris Club creditor
nations was brokered recently under the “Cologne terms”.
The Paris Club of creditor countries are restructuring Somalia’s
external public debt by cancelling a large quantum of debt- to the
extent of US$1.4 billion. Some of these debt dates can be traced back
to four decades. Indebted Somalia was lobbying hard for the waiver
of these debts since the economy took a severe hit on account of the
mounting debt and lack of resources for the country to repay.
The agreement between Somalia and the Paris Club creditor nations was
brokered recently under the “Cologne terms”. Cologne agreement or
terms is an arrangement to provide interim debt relief to heavily
indebted poor countries. Under this initiative some of their debts
could be waived under certain conditions. Somali finance minister
Abdirahman Beileh welcomed the debt cancellation. He also committed
that Somalia would continue with economic reforms to help rebuild the
country’s fragile economy.
Somalia can now reduce its external debt to US $557 million in net
present value terms from US $5.2 billion at the end of 2018.
Paris Club creditor countries are an initiative for heavily indebted
poor countries and formed in the aftermath of the Cologne Summit of
IMF in 1999. The summit accepted to raise the level of cancellation
for the poorest countries up to 90% or more of indebtedness, if
necessary, to bail them out from the economic crisis. The summit
identified 39 countries potentially eligible for the assistance under
the scheme. As of now, only 36 countries have availed of this
assistance.
