Ethiopia Secures Deal to Restructure $8.4 Billion in Debt
Ethiopia‘s finance ministry made a significant announcement on Friday, revealing that they have reached a preliminary agreement with creditors to restructure the country’s debt amounting to $8.4 billion.
Beginning in 2021, Ethiopia has been engaged in negotiations with its creditors in an effort to reduce a portion of its $30 billion external debt.
By the end of 2023, Ethiopia had fallen behind on some of its loan payments, a consequence of the severe impact of the COVID-19 pandemic, the conflict between Russia and Ukraine, and a devastating civil war that ravaged the country from 2020 to 2022.
In a statement posted on Facebook, Finance Minister Ahmed Shide expressed his optimism about the new agreement, stating that it signifies a significant step towards normalizing relations with international partners and ensuring economic stability for the Ethiopian people.
The restructuring discussions were conducted under the G20 “Common Framework,” established in 2020 by the world’s wealthiest nations to assist financially distressed countries in reducing their debts under strict guidelines.
Credit: CNBC Africa
So far, Chad, Ghana, Zambia, and Ethiopia are the four countries that have engaged in the debt restructuring process.
“This is a major victory for the Ethiopian government,” said economic specialist Samson Berhane in a statement to AFP.
He further added, “With a majority of Ethiopia’s debt maturing this year, this action will help save significant foreign exchange reserves and prevent further widening of its balance of payments deficit.”
Since assuming office in 2018, Prime Minister Abiy Ahmed has been driving significant economic reforms in the state-controlled economy. Ethiopia has agreed to liberalize its currency, and the International Monetary Fund approved a $3.4 billion loan program in July.
Despite these efforts, inflation in the country remains high and is projected to reach 23.3% by 2025.
