In a groundbreaking move to support Somalia’s economic recovery, the United States has agreed to forgive $1.1 billion of the East African nation’s debt, marking a major milestone in efforts to address Somalia’s longstanding financial struggles. The debt cancellation, which represents nearly a quarter of Somalia’s total outstanding debt, was announced in Mogadishu on Tuesday.
The debt had accumulated largely under the military regime of Siad Barre, which collapsed in the early 1990s, plunging the country into civil war and economic collapse. Since then, Somalia has grappled with political instability and a lack of sustainable development. President Hassan Sheikh Mohamud referred to the debt as a “huge weight” on the country, stressing the critical importance of addressing it to support the nation’s recovery.
The formal agreement to cancel the debt was signed in Mogadishu by Somalia’s finance minister, Bihi Egeh, and U.S. Ambassador Richard Riley. In a statement, Egeh expressed deep gratitude, thanking the U.S. government for its ongoing support of Somalia’s economic reforms. “We are deeply thankful to the U.S. government and people for their unwavering commitment to our growth and development,” he said.
The cancellation is part of the broader Heavily Indebted Poor Countries (HIPC) Initiative, a program led by the International Monetary Fund (IMF) and the World Bank to help the world’s most impoverished nations reduce their unsustainable debt. In December 2023, Somalia successfully completed the HIPC program, making it eligible for $4.5 billion in debt forgiveness and restoring its relationship with international financial institutions after years of isolation.
Ambassador Riley hailed the agreement as “a great day for both countries,” noting that the U.S. had been Somalia’s largest bilateral creditor, holding around 20% of the country’s total debt in 2018. He praised Somalia’s progress in implementing critical economic reforms and building financial accountability. “Somalia has shown real commitment to strengthening its economy and creating the conditions for sustainable development,” Riley said.
This move comes on the heels of similar actions by other international creditors. In March 2024, the Paris Club—an informal group of wealthy creditor nations—wrote off 99% of Somalia’s $2 billion debt to its members. According to the World Bank, this helped reduce Somalia’s debt-to-GDP ratio from 64% in 2018 to under 6% by the end of 2023. Additionally, the OPEC Fund for International Development canceled $36 million of Somali debt in June, with financial support from Saudi Arabia.
Despite the progress made, experts caution that Somalia may still face challenges when it comes to attracting private investment due to ongoing concerns over political instability and governance. Harry Verhoeven, a prominent expert on the Horn of Africa’s political economy, described the debt forgiveness as a “meaningful step” that will enable Somalia to tap into more public financing through international development banks.
With a significantly reduced debt burden, Somalia’s leadership is optimistic about the country’s future economic prospects. The debt relief offers hope for a more stable financial future, with greater opportunities for investment, growth, and development as Somalia continues its recovery.
