In what’s being hailed as a critical turning point for one of the world’s most debt-stricken nations, Somalia has signed a $306.5 million debt relief agreement with the Arab Monetary Fund (AMF), a move expected to reshape the country’s fragile economy and reframe its relationship with international lenders. The deal, finalized in Kuwait on April 10, 2025, comes at a time when Somalia is attempting to claw its way back from the economic and humanitarian abyss after decades of war, instability, and natural disasters.
The new arrangement allows for the restructuring of Somalia’s debt to the AMF and builds on the remarkable milestone the country reached in late 2023 when it secured the cancellation of 99 percent of its external debt from Paris Club creditor nations. With this new agreement, Mogadishu is hoping to secure more room to maneuver financially and begin unlocking funds for desperately needed investments in infrastructure, health, and education.
Somalia’s Finance Minister, Bihi Egeh, described the AMF agreement as a “crucial breakthrough,” adding that it signals growing international confidence in Somalia’s reform agenda. “This shows that we are not alone,” he said. “We have partners who are ready to walk with us as long as we stay on the path of reform, transparency, and growth.”
For a country whose public institutions were practically non-existent just over a decade ago, the deal reflects significant progress in fiscal management and governance. Somalia has spent years implementing economic reforms under the guidance of international lenders such as the International Monetary Fund (IMF) and the World Bank. Those reforms included introducing a new public financial management system, implementing revenue collection mechanisms, and cracking down on corruption. The results have been encouraging—though far from complete.
But the real question haunting analysts and Somali citizens alike is this: will this debt deal translate into real change on the ground? While it gives breathing room to the government, Somalia’s challenges remain enormous and, in some areas, overwhelming.
Recommended Stories
The country’s economic base remains perilously narrow. Agriculture—mostly subsistence farming and livestock—is the backbone of the economy, but it is highly vulnerable to climate shocks. In fact, the Horn of Africa, including Somalia, has been battered by a historic five-season drought followed by devastating floods, displacing millions of people, ruining crops, and plunging already impoverished communities deeper into hunger and insecurity.
The impact of climate change is impossible to ignore. The country has seen the twin scourges of flooding and drought arrive in tighter, more frequent cycles, destroying any gains made between disasters. Somalia also continues to grapple with insecurity, most notably from the al-Shabaab insurgency, which controls parts of southern and central Somalia and regularly attacks civilians, government officials, and peacekeeping forces.
In addition to insecurity and climate disasters, there’s the ever-present issue of weak infrastructure. Roads are broken, airports outdated, and access to clean water is patchy at best. Investment is sorely needed in all sectors—from health clinics to schools to internet connectivity. Government officials hope that a more stable debt profile and reengagement with Arab and Western financial institutions will bring in foreign direct investment and development aid to fill these critical gaps.
The role of the Arab Monetary Fund in this equation is significant. Based in Abu Dhabi, the AMF’s mission is to promote economic stability and cooperation across the Arab world. Its willingness to negotiate with Somalia on favorable terms is being viewed by some observers as not just economic support but also a geopolitical signal. Gulf nations, particularly the UAE and Qatar, are increasingly interested in expanding their influence in the Horn of Africa—a strategic region straddling the Red Sea and the Indian Ocean.
But geopolitics aside, Somali citizens are cautiously optimistic. “We hear about debt deals and reforms, but what we want to see is jobs, clean water, education,” said Farhia Ali, a teacher in Baidoa, a town hit hard by drought and displacement. “Let the people feel it, not just the government.”
Indeed, for the Somali government, the challenge now is to ensure that the benefits of debt relief are not lost in bureaucracy or absorbed by elite networks. Transparency and accountability will be crucial. If these resources are spent wisely and if Somalia can maintain the pace of reform, this could be the beginning of a genuine economic recovery.
Still, some skeptics remain. “This is a good step,” said a regional economic analyst in Nairobi, “but Somalia is walking a tightrope. Any slip in reform momentum, any uptick in violence, or a new climate disaster, and they could be back to square one.” In the end, Somalia’s $306.5 million debt deal is not a magic wand. It’s a tool—one that must be used with care, vision, and resilience. Whether it proves to be a lifeline or a mirage will depend on what comes next.
