Norway will provide a $359 million bridging loan to Somalia next year to clear the debt owed to the World Bank’s International Development Association signalizing a major step towards the country’s debt relief.Ads By GoogleThe Norwegian government said in a statement Thursday it is proposing a short term loan of NOK 3.135 billion next year which will clear the arrears due to the World Bank.
“Technically, this is a loan to Somalia, but the funds will be transferred to a World Bank account. The World Bank will then grant Somalia a new loan, which will be used immediately to repay the bridging loan from Norway,” the statement read in part.
Somalia’s debt to Norway amounts to NOK 16 million but this amount, Norway said, will be cancelled if Somalia’s other debtors commit to write off their debts to Somalia.
Somalia’s external debt amounts to approximately USD 4.7 billion and the country has been struggling to clear this debt through the Heavily Indebted Poor Countries (HIPC) initiative which grants debt relief to heavily indebted countries under a stringent framework.
According to the statement, the UK is also committing to write off debts owed to the African Development Bank. This means that Somalia just needs one more donor country to cover its debt to the IMF, it added.
“Debt relief is essential if Somalia is to continue its stabilisation and reform efforts. This bridging loan operation shows what we can achieve when donors and multilateral financial institutions work together,” Norway’s Minister of International Development Dag-Inge Ulstein said.