Ethiopia secures $1.5 billion debt relief for financial recovery
The Ethiopian government has announced that it has successfully negotiated a $1.5 billion debt relief agreement with creditors, providing a temporary respite from its financial challenges triggered mainly by conflict in some regions in the country.
The Central Bank Governor Mamo Mihretu announced the agreement on November 29, 2023, and further emphasized the significance of the interim debt service suspension in saving approximately $1.5 billion that would have been allocated to debt servicing, the East African reports.
"We've been able to achieve an interim debt service suspension and therefore able to save around $1.5 billion that would have gone to debt servicing," Mamo informed a parliamentary committee.
The announcement was further corroborated by the Paris Club which described the debt relief agreement as a "debt standstill from Ethiopia's official bilateral creditors," providing a time-limited liquidity relief as the nation gears towards extensive consultations on debt treatment.
Ethiopia has racked up an estimated amount of $28 billion in external debt which is further worsened by soaring inflation, conflicts and shortage of foreign currency reserves. The country engaged in negotiations with bilateral creditors, including China, which has extended loans of around $14 billion, as reported by analysts, the report noted.
Ethiopia's financial struggles have been exacerbated by the two-year conflict in the northern Tigray region, which concluded with a peace deal in November of the previous year. The country estimates a need for about $20 billion to reconstruct the northern regions affected by the conflict, which resulted in an estimated half a million casualties according to U.S. figures.
Early on in November 2023, the Fitch Ratings agency downgraded Ethiopia's debt plunging it deeper into junk territory to CC, a level it said "reflects a probable risk of a default event".
