Somalia - Joint World Bank-IMF Debt Sustainability Analysis (English)

This Low-Income Countries Debt Sustainability Analysis (LIC-DSA) provides an update of the December 2023 LICDSA. The updated LIC-DSA incorporates three new elements:(i) updated borrowing assumptions that incorporate IDA20's moratorium on hardening of financing terms for countries affected by extreme fragility, such as Somalia, which in practice extends the grant status for Somalia until end-June 2025 (previously end-June 2024), (ii) shift in the first year of projections to 2024 (previously 2023), and (iii) updated macroeconomic forecasts. As with the December 2023 LIC-DSA, the baseline assumes full delivery of debt relief under the HIPC Initiative, Multilateral Debt ReliefInitiative (MDRI), and beyond-HIPC assistance at the Completion Point reached on December 13, 2023. Total public debt is projected to increase in nominal terms to US$778 million at end-2024 from US$766 million at end-2023, but decline relative to GDP from 6.6 percent of GDP at end-2023 to 6.1 percent of GDP at end-2024. The majority of total public debt is external. Somalia is assessed to be at moderate risk of debt distress, both for external and overall public debt. The present value (PV) of public and publicly guaranteed (PPG) external debt is estimated to be 4.7 percent ofGDP in 2024 - below the 30 percent threshold for countries like Somalia with weak debt carrying capacity. However, the forecast indicates sustained breaches of the external debt service to revenue indicative threshold under the stress scenario in the long term as grace periods on initial loans expire. Under the moderate rating for overall risk of debt distress, Somalia is mechanically assessed to have substantial space to absorb shocks. However, the country is vulnerable to security, international commodity price, and climate shocks and remains highly dependent on externalconcessional financing, underscoring the importance of strengthening domestic revenue mobilization, debt management institutions, and institutional capacity.