Insecurity, delayed polls dash Somalia’s debt relief hopes
Saturday February 19 2022
Somalia’s much-delayed polls have placed hurdles on the country’s path to achieving total debt relief under an initiative by the International Monetary Fund.
According to IMF, the political uncertainty, election delays, security and environmental shocks have added to the pain to the ongoing process of terminating Somalia’s IMF-supported programme for short-term financing, as well as derailing the achievement of full debt relief under the Heavily Indebted Poor Countries (HIPC) initiative. This, IMF warned, will make it difficult for the war-torn country to access financial support.
Laura Jaramillo, Mission Chief for Somalia, IMF Middle East and Central Asia department told reporters in a virtual press briefing on Thursday that the continued political uncertainty and election delays has put IMF’s financing programme in Somalia at risk of stalling.
“If the pending programme review is not completed by May 17, 2022 — within 18 months of the previous review — the programme automatically terminates,” said Ms Jaramillo.
“If Somalia’s programme terminates, it will jeopardise the disbursement of budget support grants, opening a financing gap that could result in new domestic arrears, and derail the timing for full debt relief at the HIPC Completion Point.”
Somalia will depend on attaining the Decision Point to ensure much of its debt owed to external lenders is forgiven. It is the point at which the full amount of HIPC initiative will be settled, bringing its national debt to less than 10 percent of the GDP.
To reach Completion Point, Somalia was supposed to “establish a further track record of good performance under an IMF programme”, according to the agency’s requirements. Mogadishu was also supposed to implement its poverty reduction strategy for at least one year as well as reform public finance management laws including stringent accountability measures.
Ms Jaramillo said the Completion Point “is well within reach” if Somalia sticks to the agreed measures, to help unlock donor support and allow stead progress towards full debt relief.
But the country is already a year late on elections and has seen wrangles between political stakeholders threaten the fragile peace. In fact, a new government elected into office after the polls could carry the needed legitimacy to continue the reforms.
In the rescheduled polling timelines, the country gave itself up to February 25 this year to complete parliamentary elections. Under the indirect electoral system, the legislators from the senate and the House of the People met in a joint sitting to elect a federal president. They should have done that before February 8 last year but couldn’t agree on the model.
Dr Abdirahman Beileh, Somalia’s Finance minister downplayed the fears, however, told The EastAfrican the country was committed to the electoral plan.
“Given the progress being made to finalise the election process, we are confident that elections will be concluded in time so as not to affect the reform programme,” he said on Thursday.
IMF’s assessment came as international players praised Somalia for turning a corner on elections, following months of wrangles. So far, the country has elected its full senate of 54 members and has also voted in 130 of 275 seats in the House of the People, of whom 28 are women. By next week, some 60 more seats will be up for grabs, according to schedules released by the Federal Electoral Implementation Team (FEIT). The country must reserve at least 30 percent of seats for women, part of the reform programmes demanded by lenders to improve gender balance.
“While political tensions among some Somali leaders continue to flare up sporadically, they have so far been contained and so have not derailed the electoral process,” James Swan, the UN Secretary-General’s Special Representative to Somalia told the UN Security Council on Tuesday.
“The risk remains, however, a miscalculation could cause these tensions to snowball into conflict.”
Somalia had, from March 2020, received a nod from the Executive Boards of the IMF and the World Bank for a Decision Point under the HIPC. It became the 37th country to receive such debt relief and it meant that its debt could be reduced from $5.2 billion at end-2018 to $3.7 billion. A further reduction to HIPC Completion Point was to take three years, when its debt will was to be reduced to $557 million.
The IMF demanded reforms to reach this stage, which would also allow Somalia to be eligible to borrow from international lenders. Somalia was allowed access to credit to deal with impact of Covid-19, in the meantime.
IMF says, “reaching this milestone has taken a lot of hard work and effort, not just by the Somali authorities — who have shown incredible commitment to reform under some very difficult circumstances, but also by its donors.”
But a delayed election is only part of the problem.
The militant group al-Shabaab has resurged recently taking advantage of chaos to attack, according to Mr Swan.