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The finance minister says the government expects to finalize a deal with each creditor country over the next few months. Ethiopia’s total external debt stood at over USD28 billion in March this year. Private creditors hold only around 5 percent of the debt, with over 90 percent being the USD1 billion Eurobond.
Ethiopia’s State Finance Minister, Eyob Tekalign, said on Friday he expected creditors would agree to restructure USD4.9 billion of debt when it completes its current restructuring exercise. The announcement comes as the country puts its long-delayed debt overhaul back on track after securing a new International Monetary Fund financing program.
The deal with the IMF will see Ethiopia receive financing of USD3.4 billion for the four-year program. It was announced hours after the country agreed to one of the fund’s key recommendations and floated its currency, the birr. Ethiopia, which is East Africa’s biggest economy, has since resumed talks to reduce its debt-repayment burden.
The finance minister says the government expects to finalize a deal with each creditor country over the next few months. Ethiopia’s total external debt stood at over USD 28 billion in March this year. Private creditors hold only around 5 percent of the debt, with over 90 percent being the USD 1 billion Eurobond.
Prime Minister Abiy Ahmed made a televised address recently to explain recent macroeconomic reforms, which include exchange rate liberalization and the establishment of a new interest-rate-based monetary policy framework. He defended Monday’s switch to a market-determined foreign exchange rate, saying it aimed to close the gap between the official and black market rates.
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The currency has since lost 31.5 percent against the dollar, causing some economic analysts to express concern that inflation could surge. Fears about the policy’s inflationary impact on low-income households have led at least two local governments to crack down on shops raising prices. The government and its creditors say the liberalization will help the private sector make a bigger contribution to the economy and boost long-term growth.
