Sri Lanka, Bangladesh agreed to IMF to provide debt relief for Somalia

Feb 17, 2020 (LBO) – Sri Lanka and Bangladesh have reportedly agreed to provide debt relief for Somalia under the Heavily Indebted Poor Countries (HIPC) Initiative of the International Monetary fund (IMF).

The Central Bank of Sri Lanka and the Ministry of Foreign Relations have expressed their concurrence to provide Sri Lanka’s contribution.

Accordingly, the cabinet approval has been granted to transfer a sum equivalent to 163 million rupees as Sri Lanka’s total contribution to the Somaliya Administered Account.

The International Monitory Fund’s burden-sharing mechanism is a policy approved by the Executive Board of the IMF in 1986 and this methodology has been adopted to reimburse the loss of income due to unpaid charges by members for various reasons.

Following 30 years of civil war and economic disruption, Somalia currently has 5.3 billion dollars in external debt.

Accordingly, a request has been made to the member countries to contribute part or all of their respective shares in the IMF internal resources to support ‘Somaliya – Possible Financing Package for Arrears Clearance and Debt Relief’ for Somaliya approved by the Executive Board of the Fund in December 2019.

Bangladesh’s bid to help the war-torn nation comes after IMF Managing Director Kristalina Georgieva wrote to Finance Minister AHM Mustafa Kamal, the IMF governor of Bangladesh, in December last year seeking Special Drawing Right (SDR) 0.70 million, or Tk 8.21 crore.

SDR refers to an international type of monetary reserve currency created by the IMF in 1969 as a supplement to the existing money reserves of member countries.

“This financing plan will help mobilize the resources that Somalia needs, for the IMF to cover its share of debt relief,” speaking at the biweekly press briefing, IMF spokesperson Gerry Rice said.

“This financing plan is actually a broader global effort, and it’s based on member contributions, of cash grants, and amounts that are, actually, derived from the IMF’s internal resources. These funds are set aside, over many years, just for purposes like this, to help very poor countries achieve debt relief. It’s something that’s been agreed by our membership,”

“We’ve used it in the past, for example, with Liberia, and it’s a mechanism that, really, involves fair burden-sharing, across the membership. So, it’s not that we’re asking one particular country. We’re not asking one particular country to cover this. It’s, really, the membership of the IMF, and it’s an agreement, among the membership, to carry that burden.”

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