AfDB approves full debt cancellation for Somalia after HIPC completion milestone

The decision will reduce Somalia’s external debt by $17.68 million, freeing urgently needed fiscal space for public services, state-building priorities, and long-term reconstruction.

The African Development Bank Group has approved additional debt relief for Somalia, paving the way for the total cancellation of all African Development Fund (ADF) loans owed by the country for the 2024–2039 period. This major milestone follows Somalia’s successful completion of the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, marking one of the most significant economic turning points in the nation’s recent history.

The decision will reduce Somalia’s external debt by $17.68 million, freeing urgently needed fiscal space for public services, state-building priorities, and long-term reconstruction.

A Landmark Achievement in Somalia’s Economic Reform Journey

Launched in 1996, the HIPC Initiative—enhanced in 2005 by the Multilateral Debt Relief Initiative (MDRI)—aims to help low-income countries exit unsustainable debt cycles. Countries that reach the HIPC completion point must meet strict governance, macroeconomic, and poverty reduction benchmarks.

Somalia’s path to this point required:

• Strengthening public financial management systems

• Implementing macroeconomic reforms

• Increasing domestic revenue mobilisation

• Improving governance and service delivery

• Expanding social protection programs for vulnerable households

“Somalia has earned this moment through determination and discipline,” said Bubacarr Sankareh, AfDB Lead Operations Advisor for Somalia. “Debt relief opens the door for stronger institutions, better services, and brighter prospects for Somali citizens, with impacts felt in classrooms, clinics, farms, and markets across the country.”

A New Chapter: Reinvesting in People and Stability

With AfDB loans cancelled through 2039, Somalia can now redirect resources to critical development priorities, including:

• Rehabilitating infrastructure damaged by conflict and climate shocks

• Investing in health and education, including teacher recruitment and expanded service delivery

• Improving access to clean water, especially in drought-prone regions

• Expanding social safety nets for vulnerable communities

• Boosting agricultural recovery and rebuilding productive sectors

• Accelerating health system restoration in underserved areas

Debt relief significantly enhances the government’s ability to finance its National Transformation Plan (NTP-1) and shift from humanitarian dependence toward durable, state-led development.

Strengthening Creditworthiness and Investor Confidence

By drastically reducing debt vulnerabilities, the decision also improves Somalia’s credit profile, rebuilds international confidence, and unlocks concessional financing for long-term reconstruction and state-building.

After the completion of all HIPC and MDRI commitments, Somalia’s external debt will fall from $5.2 billion in 2018 to just $557 million — one of the most dramatic debt reductions in African history.

This follows Somalia’s clearance of $122.6 million in arrears to the AfDB in March 2020, which allowed the country to resume full engagement with international financial institutions and pursue the reforms needed to complete HIPC.

A Historic Opportunity for Sustainable, Inclusive Recovery

Somalia now stands at a turning point. With debt burdens reduced and reforms underway, the country is poised to:

• Advance state-building

• Strengthen economic resilience

• Invest in productive sectors

• Enhance governance and service delivery

• Build a foundation for long-term peace and stability

The AfDB’s action represents a powerful vote of confidence in Somalia’s future—and a chance for the government to accelerate a new phase of national transformation.