Ethiopia Expects Debt Process to Reprofile $4.9 Billion of Loans

Ethiopia expects its creditors will agree to restructure $4.9 billion of debt, Planning and Finance Minister Fitsum Assefa said.

The authorities in East Africa’s biggest economy have resumed talks to reduce its debt-repayment burden by lengthening maturities after agreeing a reform program with the International Monetary Fund.

“We have managed to secure $4.9 billion in debt restructuring, which will lower the country’s debt exposure from high-risk to medium-risk,” according to remarks by Fitsum aired by the state broadcaster on Thursday. “Upcoming discussions may include debt cancellation, and by the end of this reform process, we expect a significant improvement in Ethiopia’s debt stress.”

She didn’t elaborate and the ministry didn’t immediately respond to a request for comment. The IMF sees Ethiopia needing about $3.5 billion of debt relief during the program.

Without the IMF agreement, Ethiopia would have had to redirect resources meant for development projects toward debt repayments, Fitsum said in a meeting with business executives in the capital, Addis Ababa.

Prime Minister Abiy Ahmed said at the same meeting that Ethiopia’s $1 billion eurobond debt that matures in December will be reduced to $800 million. He didn’t elaborate.

A memorandum of understanding with bilateral creditors, which will spell out any extensions in duration, reduction in debt service and if necessary, lowering of the present value, should be in place before the second review of the IMF program in December, according to a program report.

Those parameters will guide how relief is offered by other official and private creditors. Ethiopia owes external creditors about $28.9 billion, a quarter of which is to China.

Ethiopia joins Zambia and Ghana in seeking to restructure its loans under a Group of 20 mechanism introduced in 2020 known as the Common Framework. The process for the other two nations was fraught with technical hurdles and differences over established procedures, as new creditors like China and Saudi Arabia for the first time negotiated alongside traditional rich-country lenders of the Paris Club.

Source:norvanreports.com