A worker pulls a wooden wheelbarrow at the Hamarweyne Market in Mogadishu, Somalia, on Dec 14, 2023. (PHOTO / AFP)

MOGADISHU - The Paris Club, an informal group of creditor nations whose objective is to find workable solutions to payment problems faced by debtor nations, has agreed to cancel more than $2 billion of debt Somalia owed to its members to help the East African country restore its debt sustainability.

The debt relief represents 99 percent of the debt Somalia owed to Paris Club members as of January 2023, according to a statement issued Wednesday.

The Paris Club creditors committed to cancel $1.2 billion in nominal terms under the Enhanced HIPC Initiative framework to contribute to restoring the debt sustainability of Somalia

"Creditors welcomed and supported the commitment of Somalia to seek a treatment at least as favorable from all its other official bilateral and external commercial creditors," read the statement.

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It said the decision was made after a meeting Wednesday between representatives of the Paris Club creditor countries and the Somali government following its Completion Point under the Enhanced Heavily Indebted Poor Countries (Enhanced HIPC) Initiative approval by the International Monetary Fund (IMF) in December 2023.

Reaching Completion Points means Somalia has implemented reforms agreed to when the country became eligible for debt relief and also fully normalized its relations with international financial institutions.

The Paris Club creditors committed to cancel $1.2 billion in nominal terms under the Enhanced HIPC Initiative framework to contribute to restoring the debt sustainability of Somalia, the statement said.

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In addition, Paris Club creditors confirmed their willingness to grant additional debt cancellation on a voluntary or bilateral basis for $815 million, the statement added.