After three decades of austerity measures on Somalia, the otherwise economically embattled East African nation is now, 30 years later, in good standing with the World Bank.
Well, before we start tipping our hats, let’s put ‘good standing’ in perspective, Somalia is now in good enough standing to receive grants but it is yet to get to economic stability that would warrant it WB loans.
To put it in the words of the World Bank, the international lender is now ready to ‘normalize relations’ with Somalia. The bank credited turning the new leaf with Somalia on its reasonably strong record of fiscal and political reforms over the last few years.
As World Bank’s Country Manager for Somalia, Mr. Hugh Riddell was quoted mid this month, good relations means that “…going forward, Somalia will be able to access grants to finance poverty reduction.”
In his media brief, the WB country executive made it bluntly clear that the ‘good standing’ status does not mean that Somalia now has access to borrowing from the World Bank, rather, it is only entitled to apply for and receive grants.
A new page for Somalia, development partners
When it comes to turning a new leaf and burying the hatchet, the World Bank is not alone. Barely a day before the WB’s announcement, the International Monetary Fund said it had enough funding pledges to ease Somalia’s staggering national debt.
With up to USD 334 million pledged by over 100 IMF member countries it is ready to provide comprehensive debt relief to Somalia. Similarly, the African Development Bank has passed a USD 122.55 million deal designed to that will serve to clear Somalia’s outstanding debt.
This is all good news because at the moment, Somalia owes in excess of USD 5 billion to external creditors. This staggering debt warrants Somalia to be placed in the list of countries entitled to get relief under the Heavily Indebted Poor Countries (HIPC) initiative.
So what has Somalia done to earn this new status? Well for one, the Horn Africa, is commended for increasing revenue generation. Once troubled by pirates off its coast and all the way to international waters, Somalia is reported to have recorded a sizable increase in revenue at its major port, the port of Mogadishu, the country’s capitol.
A positive move in the eyes of lenders, or as the World Bank put it, “…this means that the government is able to generate its revenue from businesses.” In other worlds, Somalia is back in business, generally speaking that is.
In trading terms, this means that investors and traders are now willing to work with Somalia. Companies are ok to trade with Somalia, to invest in business in Somalia and to pay taxes to the government of Somalia.
Part of the faith in Somalia is rooted in its national budget transparency, which the World Bank says is now the subject to regular comprehensive auditing.
Likewise, the central bank of Somalia is also playing an active role in the ongoing economic reforms in the country, i.e. monitoring the financial sector’s transfer of funds, regulating cash flow to check inflation and also following closely on the practices of the now emerging new commercial banks in the country.
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