Somalia has announced that it will cancel its unpaid debt of over $1.1 billion borrowed from the United States. The loan was taken during the administration of Zyad Barre and accounts for a quarter of the total debt of the country.

President Hassan Sheikh Mohamud stated that Somalia is struggling under the weight of loans incurred during times of instability and war, with interest payments adding to the financial burden. The Minister of Finance, Bihi Iman Igeh, expressed gratitude for the United States’ support in assisting with economic reform and development in Mogadishu.

The cancellation of the debt is seen as a significant step towards improving the economy of Somalia and freeing the country from financial constraints. The United States has pledged to cancel a series of loans totaling $1.14 billion to Somalia.

According to data from the International Monetary Fund (IMF), the US loan forgiveness covers a significant portion of Mogadishu’s bilateral debts. US Ambassador Richard Riley emphasized that a significant portion of Somalia’s $4.5 billion debt is owed to the United States, and the cancellation of this debt adheres to the IMF’s policies designed to assist heavily indebted nations.

With the support of the United States and its partners, Somalia aims to implement reforms, new financial laws, and enhance financial accountability. Somalia is among the countries benefiting from the 2023 World Bank and IMF initiative to alleviate debt for highly indebted nations, fostering better relationships with international financial bodies.

In a separate development, the “Paris Club” of the wealthiest creditor nations recently announced that 99 percent of the $2 billion owed by Somalia to the group will be canceled. This move has significantly reduced Somalia’s external debt from 64 percent of GDP in 2018 to 6 percent by 2024, as per World Bank data.