Somalia: After debt relief, politics

EDITORIAL | Somalia may have been so accustomed to negativity for the past three decades. But this week, it may have been the only country in the world this week that received good news.

In the midst of the raging new coronavirus disease (COVID-19), Mogadishu received debt relief from its former lenders.

On Tuesday, the Paris club – the group of rich countries that traditionally lend to the poor – agreed to clear Somalia’s arrears of 1.4 billion. $.

This decision and that of the World Bank, the International Monetary Fund and the African Development Bank (AfDB) to eliminate the arrears owed to them by Somalia has led to a promising future.

Somalia’s outstanding debt before this was $ 5.2 billion. These arrears have been reduced to $ 557 million. Simply put, this means that Somalia has returned to the world of global borrowing after 30 years in the dark. This means that Mogadishu could start asking for project financing in what could allow Mogadishu to apply for loans from lenders.

“This is a recognition of our strong track record of reform and commitment to rebuilding our country,” said Abdirahman Beileh, his Somali finance minister, after meeting almost with Paris Club members on Tuesday.

“We will continue our reforms and move forward.”

In Somalia, however, the question of who deserves credit is just as important as whether the credit is deserved at all. In fact, Somalia’s debt situation is still significant and Mogadishu may want to do much more to get the debt completely forgiven. Below a level known as the Completion Point, lenders can take up to 16 years to forgive the debt or at least three years.

Leaders of the opposition coalition forum for national parties pointed out that the results seen this week started from previous regimes.

“[This is] The culmination of many years of dedication and hard work from successive administrations, “said Sharif Sheikh Sharif Ahmed, former president of Somalia, now patron of the FNP in a statement.

“We see the debt relief framework as a political process supported by Somalis of all persuasions. I particularly pay tribute to the people of Mogadishu, whose taxes have contributed significantly to raising revenue for FGS, a crucial requirement within HIPC. ”

The FNP includes two former presidents of Ahmed and Hassan Sheikh Mohamud, so that could explain the desire to be recognized, but Somalia has recently become a political hotspot.

Elections were scheduled for later in the year, and most leaders saw the debt relief in political terms, even though the steps have been taken by government bureaucrats.

The FNP, for example, the “extroverted administration” of Mohamed Farmajo could arm the results to realize “political goals” and referred to what it called misinformation to the public in debt relief, which was portrayed as a cancellation.

“For an administration that has spent the last three years dealing with the electoral process and intimidating its opposition, the concern about politicizing debt relief and the attempt to steal IDA funds is widely shared by the public,” the FNP said in a statement.

Somalia was the 37th beneficiary of a program known as the Highly Indebted Poor Country Initiative (HIPC). It followed Liberia, another African country rescued ten years ago when it started a deadly civil war.

Global lenders said this move would allow Somalia to borrow for development and deviate from tradition now that donors have had to chip in most of Somalia’s budget.

Naima N Ahmed, an economist in the countries of the Horn of Africa, argues that Somalia could only benefit from debt relief as much as political decisions are sound.

“[The] The next phase is more political than economics. Aside from politics, observing healthy physical politics will finally write off debt, ”she argued on her Twitter page, referring to the next three years.

“[There is no doubt] There is no doubt that Somalia needs both fiscal support and growth support (in the range of $ 0.5 billion) due to the likely decline in domestic revenue. It’s time to think outside the box and tax sources for diversity – domestic tax needs to be addressed. ”

Donors argued that Somalia should be able to draw attention to much-needed services in order to improve living conditions and eventually eradicate poverty. However, some experts believe that the debt relief offered to African countries may not help Mogadishu.

Abdiwahab Sheikh Abdisamad, an analyst at Southlink Consultants in Nairobi, claimed that some countries in Africa ended up paying more under debt relief than without it.

“The debt reduction offered is too small for African countries. For example, what is given to Zambia and Niger, they actually pay more after the initiative, ”he said. But politically, he claimed that the relief is a good victory for the current administration.

“To some extent, it could be a campaign tool for Farmajo at the next election.”

To do so, however, could mean that Somalia’s next election will be held and that it will be a topic-based political campaign. Somalia, however, has 70 percent illiteracy, and most of the population thinks about food and security before anything else.

Earlier planning Abdirahman Abdishakur warned that Somalia must learn from other countries in the region that abused their relief and failed to emerge from the poverty distortion.

“The government can be proud of that and celebrate the fact that we have cleared all obstacles to the decision point,” he said of the debt relief announcement.

“Now we have to meet the conditions for the fourth stage, the completion point, which is the last stage where Somalia’s debt will be forgiven, provided we meet all the conditions. Remember we still have to pay our debts, but now to these countries. ”

Somalia is a federal system, but has seen donors admit that any benefits of debt relief should see a pleasant dialogue between all government arms about the country’s political future.

Ben Fender, the British ambassador to Somalia, said: “Greater dialogue” between the federal government in Somalia and the federal member states will be crucial.

“[It is vital…] To get the most out of debt relief, provide national direct elections in a timely manner in line with the new law and tackle coronavirus. I welcome these apparent steps forward and hope that those affected can agree to meet very soon. ”

It is Britain, as a member of the IMF, that convinced 100 other key members to agree on debt relief for Somalia. The relief, however, meant that Somalia could now owe countries that pooled their funds to settle arrears, Mogadishu owed.

The IMF claims that the relief could help Somalia repair its previously destructive management of the economy. But it seems that political maturity will be the key.


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