The International Monetary Fund (IMF) and the World Bank’s International Development Association have determined that Somalia has taken the necessary steps to begin receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. Somalia is the 37th country to reach this milestone, known as the HIPC Decision Point.
Debt relief will help Somalia make lasting change for its people by allowing its debt to be irrevocably reduced from US$5.2 billion at end-2018 to US$557 million in net present value terms (NPV) once it reaches the HIPC Completion Point in about three years’ time. As Somalia continues on its path towards stability and development after 30 years outside the international financial system, the immediate normalization of its relations with the international community will re-open access to critical additional financial resources to strengthen the economy, help improve social conditions, raise millions out of poverty, and generate sustainable employment for Somalis.
“We welcome Somalia’s efforts to restore stability, engage with creditors, and adopt a poverty reduction strategy,” said World Bank Group President David Malpass. “Resumption of regular financing to Somalia is an important landmark, and we look forward to further economic and social progress.”
“I would like to congratulate the Somali government and people for their intense efforts over the past years leading to this momentous event,” said Kristalina Georgieva, IMF Managing Director. “Successful reform efforts have laid the foundation for inclusive economic growth and for addressing the needs of the country’s most vulnerable people. Work must continue to sustain and expand the implementation of these reforms as Somalia starts a new chapter of its history. I am confident a more resilient and prosperous future lies ahead for the people of Somalia.”
“The Government and People of Somalia are very pleased by the IMF’s and World Bank Group’s decision which allows Somalia to fully re-engage with International Financial Institutions. This decision is an important milestone which presents ample opportunities for Somalia as it relentlessly pursues its ongoing reform processes as well as its recovery and development agenda,” said Hassan Ali Khayre, Prime Minister, Federal Government of Somalia. “The journey leading to this decision required hard work, dedication and partnership. The FGS expresses its appreciation to the IMF, World Bank Group and partners for their unwavering support and to the Somali people for their patience and resilience in this journey.”
Somalia has committed to maintaining macroeconomic stability; implementing a poverty reduction strategy; and putting in place a set of reforms focused on fiscal stability, improving governance and debt management, strengthening social conditions, and supporting inclusive growth in order to reach the HIPC Completion Point. The World Bank and IMF will continue working together to provide the technical assistance and policy guidance the authorities need to achieve these goals, including in the context of the new, three-year IMF financial arrangement.
In addition, the World Bank is considering a range of new IDA investments with a focus on immediate relief for communities impacted by flooding, the locust invasion as well as preparing for the fast-moving threat of COVID-19. The leadership of the World Bank Group and the International Monetary Fund expressed thanks to their member countries of all regions and income levels, in particular Italy, Norway, Qatar, and the United Kingdom, together with the EU, whose interventions catalyzed support and provided the necessary financial resources to help Somalia reach the Decision Point.
Details of the Debt Relief Operation
At the start of the HIPC process, Somalia’s public- and publicly-guaranteed external debt was estimated at US$5.2 billion in NPV terms. Application of traditional debt relief mechanisms reduces this debt to US$3.7 billion.
Additional debt relief under the enhanced HIPC Initiative is estimated at US$2.1 billion in NPV terms. Of this amount, US$843 and US$1,225 million is projected to be provided by official multilateral and bilateral creditors, respectively.
Paris Club creditors are expected to make a decision on debt relief by the end of March 2020. The largest Paris Club creditors are the United States, Russia, Italy, and France. The IMF Executive Board has approved interim debt relief on debt service falling due to the IMF in the period between the HIPC Decision and Completion Points. At the HIPC Completion Point, Somalia’s current debt due to the IMF will be paid with the proceeds of financial contributions that have been received from over 100 IMF members, including many low-income countries.
MDRI debt relief from IDA and the African Development Bank would cancel all remaining claims at the Completion Point.
Together, Somalia’s external debt burden is expected to fall from about US$5.2 billion (110.7 percent of GDP) in NPV terms as of end-2018 to US$557 million (9 percent of GDP) once the Completion Point is reached.
IMF and World Bank Arrears Clearance Operations
Arrears to IDA were cleared on March 5, 2020 through bridge financing provided by the government of Norway, reimbursed with the proceeds of a Development Policy Grant.
Arrears to the IMF were cleared on March 25 with the assistance of bridge financing from the government of Italy, which the authorities have reimbursed using the front-loaded access under the new IMF financial arrangement.
Arrears to the African Development Bank were cleared on March 5, 2020 through bridge financing provided by the government of the United Kingdom and a contribution from the EU. The bridge loan from the UK was reimbursed by the proceeds of a Policy Based Operation Grant.
The HIPC Initiative
In 1996, the World Bank and IMF launched the HIPC Initiative to create a framework in which all creditors, including multilateral creditors, can provide debt relief to the world’s poorest and most heavily indebted countries to ensure debt sustainability, and thereby reduce the constraints on economic growth and poverty reduction imposed by the unsustainable debt-service burdens in these countries. To date, 37 HIPC countries, including Somalia, have reached their decision points, of which 36 have reached the completion point.
Created in 2005, the aim of the Multilateral Debt Relief Initiative (MDRI) is to reduce further the debt of eligible low-income countries and provide additional resources to help them reach their development objectives. Under the MDRI, three multilateral institutions – the World Bank’s IDA, the IMF and the African Development Fund– provide 100 percent debt relief on eligible debts to qualifying countries, at the time they reach the HIPC Initiative Completion Point.
Strengthen Inclusion and Empower the World’s Invisible Billion
The World Bank announced today the launch of the second Mission Billion Challenge for innovative solutions to increase inclusion and access to digital platforms such as identification systems. This challenge will crowdsource innovations at a time when countries seek to deliver cash relief to vulnerable persons, such as informal workers affected by the COVID-19 pandemic. The Challenge offers cash prizes totaling US$150,000 for the most promising solutions.
“The challenges countries are facing to mitigate the economic impact of COVID-19 underscore the urgency for action. Innovation that takes into consideration gender equality and different levels of access to technology among vulnerable groups is critical,” said World Bank Vice President for Infrastructure Makhtar Diop, “The Mission Billion Challenge is a platform for sourcing solutions that address disparities by helping to ensure identification systems are inclusive of all people.”
The Mission Billion Challenge comes at a time of an unprecedented global crisis. The pandemic highlights the importance of platforms (such as foundational IDs, government to person (G2P) payments, and social registries) to quickly scale up or to introduce new social protection programs. In particular, countries with such assets have been able to efficiently make cash transfers to informal workers, migrant workers, and other vulnerable populations who are difficult to identify and not commonly included in social safety nets. The Challenge seeks more solutions to how countries can increase their efforts to reach women and girls, and vulnerable populations—who often lack smartphones, computers and broadband internet access—to prove who they are, remotely with no or minimal in-person interaction, so they can access services and benefits with minimal risks to health.
“Inclusion must be at the heart of all digital solutions. Vulnerable groups—such as the poor, people living in remote areas, women and girls, migrants and refugees—are more likely to face barriers to accessing and using their IDs. They must have equal access to services, support, and new economic opportunities which having an ID helps create,” said World Bank Vice President of Equitable Growth, Finance, and Institutions Ceyla Pazarbasioglu.
The 2020 Mission Billion Challenge offers a Global Prize for solutions with world-wide application to ensure the inclusivity of ID systems for vulnerable groups, particularly during physical distancing requirements. This year, a new Regional West Africa Prize, will seek innovative solutions that facilitate contributions to social insurance programs, such as pensions and savings accounts, by informal sector workers.
Individuals and organizations with a strong passion for developing innovative solutions are encouraged to apply. Submitted solutions to the Challenge will be reviewed by a group of experts in digital identification, inclusion, and international development. Finalists will be invited to a high-level event to present their solutions in front of distinguished judges around the World Bank Group’s Annual Meetings in October 2020.
The Mission Billion Challenge is open. The submission deadline is August 14, 2020. To learn more about the Challenge, visit: http://id4d.worldbank.org/missionbillion.
About the Identification for Development (ID4D) Initiative
The World Bank Group’s Identification for Development (ID4D) Initiative helps countries realize the transformational potential of digital identification. ID4D is a cross sectoral initiative that works closely with countries and partners to enable all people to exercise their rights and to access services, including to provide official identification to the estimated 1 billion people currently without one. ID4D has three pillars of activity: country and regional engagement; thought leadership; and global convening and platforms. The ID4D agenda supports the achievement of the World Bank Group’s two overarching goals: ending extreme poverty by 2030 and promoting shared prosperity. ID4D is supported by the Bill & Melinda Gates Foundation, the UK Government, the French Government, the Australian Government, and Omidyar Network.
Enabling Europe to lead the green and digital transition
The Commission released today its latest report on the EU’s Science, Research and Innovation Performance, through which it analyses how Europe performs in the global context. It highlights the need for research and innovation (R&I) to support sustainable and inclusive growth of companies, regions and countries, making sure that no one is left behind in the quest for strengthening innovation systems, especially in less-developed regions. It also emphasises the importance of ensuring that Europeans have the right skills, in the light of new technological revolutions, as well as the significant role of R&I policy in reinforcing companies’ productivity, resulting in jobs and value creation, in a sustainable way. In particular, the 2020 edition of the biennial report presents 11 policy recommendations to support our people, planet and prosperity.
Mariya Gabriel, Commissioner for Innovation, Research, Culture, Education and Youth said: “Research and innovation is at the core of the response to the unprecedented crisis we are facing and can significantly contribute to the economic recovery. The 2020 Science, Research and Innovation Performance report shows how research and innovation are central to bring about the ecological and digital transitions Europe needs. Horizon 2020 and the future Horizon Europe programme play a crucial role in this transformation.”
The EU ranks among the top players in scientific production and excellence, for example accounting worldwide for 25% of top-cited scientific publications on the topic of climate and for 27% in the area of bioeconomy. When it comes to patent applications in these two areas, the EU is also leading the way with 24% in climate and 25% in bioeconomy. Yet, more efforts are needed to turn research results into sustainable marketable solutions as well as to build a strong European Research Area and increase the effectiveness of public research systems.And, as digitalisation is transforming R&I,the right policy mix should foster deep-tech and researchers’ digital skills, alongside promoting open science and ensuring sufficient investments in high-quality data infrastructures. Horizon Europe, the EU’s next research and innovation framework programme, will be a key part in stepping up and steering R&I efforts, through its mission-oriented approach and European partnerships.
Building on the EU’s excellence and top performance in science-based research and innovation, the Science, Research and Innovation Performance report presents 11 policy recommendations, grouped around three main pillars:
- R&I for a safe and just space for humanity;
- R&I for global leadership;
- R&I for economic and societal impact.
Together, they pave the way towards R&I delivering on the Sustainable Development Goals and mainstreaming them into EU policies and initiatives that will contribute to a fair, climate-neutral and digital Europe, while at the same time boosting the competitiveness of European businesses and regions.
The Science, Research and Innovation performance of the EU report analyses research and innovation dynamics as well as Europe’s performance on science and innovation and their drivers. The Report combines indicator-based macroeconomic analysis with in-depth analytical research to create a narrative that speaks to an audience of both research and innovation as well as economics and finance policymakers and analysts. This is the third edition of the biennial publication by the European Commission’s Directorate-General for Research and Innovation.
World Bank: Belarus’ Economy Can Face a Severe Shock
As a small, open, commodity-exporting economy, Belarus is heavily exposed to shocks caused by deep contractions in its main trading partners, the collapse of oil prices, and global financial volatility related to the COVID-19 pandemic, says the World Bank’s latest Economic Update for Belarus, released today. Belarus’ economy is anticipated to contract by at least 4 percent in 2020 – the largest decline in 25 years – and growth is expected to remain weak in the medium-term.
“The impacts of COVID-19 will be severe for Belarus,” said Alex Kremer, World Bank Country Manager for Belarus. “A faster return to normal, however, could be achieved by enabling social distancing to slow the spread of the virus and cash transfers to assist vulnerable households. In addition, policy measures to boost competitiveness and productivity will allow Belarus to take advantage of global trends expected to accelerate after COVID-19. These include the growth of digital services, as well as more opportunities for goods and services, as producers seek to diversify supply chains and relocate manufacturing closer to home.”
A Special Topic Note that is part of the Update reviews the experiences of other countries in responding to the pandemic and formulates potential policy measures for Belarus.
“To help mitigate the social and economic impacts of the pandemic, it is critical to strengthen support to the poor and most vulnerable,” said Kiryl Haiduk, World Bank Country Economist for Belarus. “In Belarus, this could include increasing the coverage and generosity of means-tested benefits, such as the cash component of the targeted social assistance program (GASP), and increasing unemployment support.”
Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled $2.1 billion. In addition, the country has received grants of $31 million. The active investment lending portfolio financed by the World Bank in Belarus includes ten projects totaling $1.05 billion.
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