Ethiopia‘s finance ministry announced on Friday that it has achieved a preliminary agreement with its creditors to restructure its debt for $8.4 billion.
Starting in 2021, the East African country has been negotiating with its creditors to write off a portion of its $30 billion external debt.
At the end of 2023, Ethiopia, whose economy was severely impacted by the COVID-19 pandemic, the conflict between Russia and Ukraine, and a catastrophic civil war in 2020–2022, fell behind on some of its loan payments.
In a Facebook message, Finance Minister Ahmed Shide said the new in-principle agreement “marks a significant milestone in our efforts to normalise our relations with international partners and deliver economic stability to the Ethiopian people.”
The G20 “Common Framework” was used to discuss the restructuring. It was established in 2020 by the wealthiest nations in the world to assist financially troubled nations in cancelling part of their debts under rigorous guidelines.
Credit: CNBC Africa
Chad, Ethiopia, Ghana, and Zambia are the four nations that have participated in the process thus far.
“This is a significant win for the Ethiopian government,” Samson Berhane, an economic specialist, told AFP.
“With the majority of Ethiopia’s debt maturing this year, this measure will save significant foreign exchange reserves and prevent its balance of payments deficit from widening further,” he stated.
Since assuming office in 2018, Prime Minister Abiy Ahmed has pushed for significant liberalising reforms in the state-run economy.
Ethiopia agreed to liberalise its currency, and the International Monetary Fund authorised a $3.4 billion loan programme in July.
Inflation in the nation is still high and is predicted to reach 23.3% in 2025.
