Ethiopia to save $4.9 billion after debt restructuring
Ethiopia’s State Finance Minister, Eyob Tekalign, has announced that the country expects creditors to agree to restructure $4.9 billion of debt upon completing its current debt restructuring exercise.
This announcement comes as Ethiopia moves forward with its long-delayed debt overhaul, which has been reinvigorated by a new financing programme from the International Monetary Fund (IMF).
At the end of last month, Ethiopia secured a deal with the IMF, receiving $3.4 billion in financing for a four-year programme. This agreement was reached shortly after Ethiopia complied with one of the IMF’s key recommendations by floating its currency, the birr.
Ethiopia, East Africa’s largest economy, has since resumed negotiations to alleviate its debt-repayment burden. Minister Eyob Tekalign indicated that the government aims to finalize deals with individual creditor countries over the next few months.
As of March this year, Ethiopia’s total external debt exceeded $28 billion, with private creditors holding about 5 percent of the debt and the majority being the $1 billion Eurobond.
Prime Minister Abiy Ahmed addressed the nation on Thursday to explain recent macroeconomic reforms, including exchange rate liberalization and the establishment of a new interest-rate-based monetary policy framework.
He defended the recent switch to a market-determined foreign exchange rate, emphasizing its goal to close the gap between the official and black market rates.
Since the currency float, the birr has depreciated by 31.5 percent against the dollar, raising concerns among economic analysts about potential inflation surges. Fears about the inflationary impact on low-income households have led at least two local governments to crack down on shops that are increasing prices.
Despite these concerns, the government and its creditors maintain that the liberalization will enhance the private sector’s role in the economy and foster long-term growth. Minister Tekalign reiterated the government’s commitment to these reforms and the anticipated benefits of a more robust economic framework.
The Ethiopian government remains optimistic that the restructuring of its $4.9 billion debt, combined with the IMF programme and ongoing economic reforms, will stabilize the economy and pave the way for sustainable growth.
Sources: News Agencies
