Two years after wiping out more than 90 percent of its external debt, Somalia is back at the negotiating table with foreign lenders, seeking further relief to stabilise strained public finances and keep economic reforms on track.

Mogadishu secured debt relief of about $4.5 billion, equivalent to more than 90 percent of its external debt stock, in December 2023, marking the end of a decade-long process of negotiations and reforms.

Renewed talksThe Ministry of Finance says continued engagement with creditors has yielded progress towards additional debt relief.“In this quarter, from July to September 2025, the Government of Somalia remained committed to implementing its debt relief strategy and engaging with its remaining bilateral and multilateral creditors to secure appropriate debt relief within the frameworks of the Paris Club Agreed Minutes of March 2024 and the Enhanced HIPC Initiative,” the ministry said in its debt bulletin for the quarter ended September 30, 2025.

The Paris Club is an informal group of 22 creditor governments, including the US, UK, Switzerland, Germany, Spain, France, South Korea and Japan. It undertakes multilateral debt rescheduling and, in some cases, reduces debt service payments and arrears owed by developing countries.

Debt profileSomalia qualified for debt relief under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative, established by the International Monetary Fund and the World Bank in 1996 to reduce the debt burden of the world’s poorest countries.

By the end of September 2025, Somalia’s total debt stood at $1.4 billion. Multilateral creditors accounted for 42 percent ($604.14 million), while bilateral creditors made up 58 percent ($838.88 million).

The largest multilateral lenders include the Arab Fund for Economic and Social Development, the Arab Monetary Fund and the IMF.

Non-Paris Club creditors account for almost 94 percent of Somalia’s bilateral debt, largely owed to Arab lenders such as the Abu Dhabi Fund, the Government of Iraq, the Kuwait Fund and the Saudi Fund.

Spain remains the only Paris Club creditor, with negotiations ongoing and an agreement expected soon. Somalia also owes $2.73 million on a commercial loan to a Serbian company.

IMF supportIn October 2025, Somalia requested an additional $40 million from the IMF to cushion the economy against widening budget deficits, largely driven by foreign aid cuts.

The proposed funding forms part of a new 36-month Extended Credit Facility arrangement of SDR 75 million (about $100 million), approved by the IMF board in December 2023.

Economic prospects weakened in 2025/26 amid sharp aid reductions and adverse weather shocks, following growth of 4.1 percent in 2024. Real GDP growth is projected at three percent in 2025 and 3.3 percent in 2026, while inflation is expected to remain stable at about 3.5 percent, although food price pressures have intensified.

Creditor negotiationsThe Debt Management Department says it continues to pursue agreements to settle outstanding arrears with remaining non-Paris Club bilateral creditors, its sole multilateral creditor and Spain, in line with the Paris Club Protocol of March 13, 2024 and the Enhanced HIPC framework.“The ongoing engagement and discussions with various creditors have yielded significant progress, with the following key milestones achieved during this period,” the ministry said.

“Concerning the other creditors, we are committed to engaging with these parties — namely Iraq, Libya, Bulgaria, Serbia, Spain and AFESD — in good faith and with our best efforts,” Somalia said.

Letters dated August 25, 2025, were sent to these creditors to advance negotiations in line with the Enhanced HIPC framework and the Paris Club minutes of March 2024.

Somalia’s debt relief under the HIPC framework has involved a wide range of multilateral, bilateral and commercial creditors. A key milestone was the Paris Club agreement, which wrote off nearly 99 percent of Somalia’s eligible bilateral debt, including the cancellation of more than $2 billion.

In November 2024, the United States cancelled $1.14 billion in debt obligations, further strengthening Somalia’s re-engagement with the international financial system.

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