Bangladesh comes to Somalia’s rescue
Since time immemorial Bangladesh has been taking on aids, grants and financial assistance from the global community. But now, it is providing debt relief to another nation, in a testament of the progress the country has made.
Bangladesh has agreed to give Tk 8.21 crore to the International Monetary Fund (IMF) as debt relief for Somalia under the Heavily Indebted Poor Countries (HIPC) Initiative, as per a letter sent by the finance ministry yesterday to the Washington-based multilateral lender.
Somalia, a majority Muslim nation just like Bangladesh, is among the top ten poorest countries of the world.
“Therefore, Bangladesh’s international image would benefit from the grant,” said a finance ministry official.
The country’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.
The IMF uses SDRs for internal accounting purposes. SDRs are allocated by the IMF to its member countries and are backed by the full faith and credit of the member countries’ governments.
Bangladesh’s share with the IMF amounts to SDR 1,066.60 million.
Following 30 years of civil war and economic disruption, Somalia currently has $5.3 billion in external debt.
On December 18 last year, the IMF’s executive board approved a financing package for delivering full debt relief to Somalia under the HIPC.
The plan relied on contributions from each of the 189 IMF member nations to provide funds that would help Somalia rebuild its economy.
Bangladesh, which recently became eligible for graduation from the least-developed country bracket by 2024, decided to support the IMF’s debt relief programme for Somalia to help alleviate poverty and assist economic reform in the African nation.
To facilitate members’ contributions to the debt relief effort, the IMF will distribute internal resources from its Special Contingent Account and refunds of deferred charges adjustments in an amount of SDR 242 million when Somalia clears in arrears to the IMF.
Members can voluntarily contribute all or part of their shares in this distribution and donors are invited to provide additional cash grants, if possible, to close the financing gap.
The distribution can only take place once the fund has received satisfactory assurances that SDR 242 million will be contributed for the purpose of Somalia’s debt relief, said the IMF letter.
After Somalia clears its dues, it will become eligible for another financing arrangement from the IMF at the HIPC decision point if the African nation displays progress through their Poverty Reduction Strategy Papers.
In 2008, a similar fundraising effort was taken to help Liberia clear its arrears.
Some 102 IMF member countries, including India and Sri Lanka, contributed a total of SDR 547 million in a similar fundraising effort to help Liberia clear its arrears.
However, during that time Bangladesh refused to donate to the funds.