Ethiopia Struggles to Meet Loan Repayments Despite Debt Relief

Ethiopia faces challenges meeting its loan obligations despite a debt suspension agreement reached in 2023. Finance Minister Ahmed Shide revealed the nation only repaid 10% of what was due in the first nine months of the fiscal year.

While the agreement with creditors provided some relief, Ethiopia still owed $512 million during the July-March period but only managed to repay $52.1 million. This default led to a missed eurobond repayment in December 2023.

The debt suspension, however, has offered some breathing room. Ethiopia saved $1.44 billion budgeted for loan repayments and is negotiating an additional $0.49 billion in suspension, narrowing the budget deficit.

The agreement with the Common Framework and China provided a two-year freeze on repayments, but Ethiopia missed a crucial deadline to secure a staff-level deal with the International Monetary Fund (IMF). Talks are ongoing and extended to June 2024.

Seeking further relief, Ethiopia is also negotiating with private creditors, including hedge funds and commercial banks, that hold its Eurobonds.

Despite the debt relief, Ethiopia’s total debt stands at a significant $65.7 billion, representing 40.2% of its GDP. However, the fiscal deficit has narrowed to $2.43 billion, an improvement from the budgeted amount of $4.9 billion.

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