Opinions

Somalia should reject IMF & World Bank Debt Relief

by David Calleb Otieno Feb 18th · 3 min read

Last week, the World Bank and the International Monetary Fund (IMF) announced that the two institutions were moving closer to offering Somalia a debt relief of USD 5.3 billion translating to about KES530 billion under the Enhanced Heavily Indebted Poor Countries (HIPC) initiative which is an IMF strategy of advancing its Structural Adjustment Programs (SAPs).


While on the face value, the Somalia Debt Relief appear to be good, behind the scene, the World Bank and IMF offer is a poisoned chalice that will lead the East African country into more colonisation using debts. The debt relief initiative started at the 1988 Toronto G7 summit where it was agreed that 33 percent of non Overseas Development Aid (ODA) would be cancelled for poor countries. The rate has since been revised upwards. This initiative came with strict conditions that were restrictive hence it did not solve the debt problem. Faced by pressure from anti-debt activists, the global moneylenders in 1996, came up with another debt relief initiative; the HIPC that was enhanced in 1999. Of significance was the involvement of the World Bank and IMF who in 1986 had resisted debt relief claiming that their statutes forbade them from offering debt relief. Why is there a change of position by IMF and World Bank?

The IMF and the World Bank were presenting a facade of magnanimity when they changed their position on debt relief but the real issue that drove them to adopting debt relief was the mortal fear that the debt could cause the entire global financial system to collapse. HIPC initiative is therefore not a tool to relieve the debt burden of the poor countries like Somalia but a strategy to make the external debt of those countries sustainable by slightly reducing the debts owed by the poor countries to put an end to late payment, defaulting and or application for debt restructuring by countries that are unable to repay their debts.

To benefit from the HIPC initiative, a country must first sign an agreement with IMF to pursue an economic policy approved by Washington popularly known as the Poverty Reduction Strategy Paper (PRSP) over a period of three years. This means that Somalia will effectively loose its sovereignty to the IMF and World Bank as it will lead to privatisation of the Somalia resources and parastatals, plunder of Somalia natural resources under the guise of ensuring that Somalia can generate enough resources to repay any future debts.

Somalia should reject the HIPC initiative and instead repudiate all her debts and focus on investing their resources to public service delivery. Somalia has all reasons to reject debt repayment if past HIPC initiative performance are anything to go by. The IMF and the World Bank are not concerned by the disastrous effects the SAPs on Somalia citizens.

While the original objective of the HIPC initiative was to guarantee fundamental human rights, eradicate poverty and enable citizens of countries concerned their sovereignty over their affairs, the reality on the ground given the experiences of countries that have joined the HIPC initiative is different since the initiatives real purpose is to enable the poor countries repay their debts regularly and to the maximum of their financial capacity. It is therefore a cancellation of debts that a country cannot repay to a level that the poor countries like Somalia cannot suspend repayment. It is about making the debts sustainable to ensure that the creditors are sure of receiving repayments without the risk of sudden stoppage of debt repayment.

The HIPC initiative is therefore not in the interest of Somalia citizens but in the interest of creditors since the SAPs that accompany the HIPC initiative will drastically reduce Somalia government’s social expenditure, devalue the Somalia currency, increase the interest rates in Somalia, development of export oriented raw material economy, complete opening up of Somalia market by elimination of custom barriers, liberalisation of Somalia economy by abolition of all capital movement control and exchange control, a tax regime in Somalia that aggravates inequalities, massive privatisation of public resources and retreat of Somalia state from competitive sectors of production. This is against the HIPC initiative own goal of guaranteeing fundamental human rights, eradicating poverty and enabling the Somalia citizens to have sovereignty authority over their affairs.

The Kenyan Peasants League and the Kenyan Social Movements for Abolition of Illegitimate Debts is calling on Somalia government to reject the HIPC initiative and is also calling on Somalia citizens to rise up and force their government to reject the initiative.

David Calleb Otieno KPL International Coordinator and Convener, Kenyan Social Movements for Abolition of Illegitimate Debts

last updated: 2020-02-18@03:02