June 20, 2024

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Ethiopian PM Abiy Ahmed

Ethiopian Debt Reaches Alarming Level

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Ethiopian foreign and domestic debt has reached an alarming level. Total debt of the country has reached 39.4 percent of the GDP. The foreign and domestic loans are 17.5 percent and 21.9 percent of the GDP. The revelations were made during a meeting of the Standing Committee on Budget and Financial Affairs of the House of People’s Representatives this week.

The Standing Committee on Budget and Financial Affairs of the House of People’s Representatives urged that the government should continue the negotiations and agreements with donors to correct the foreign exchange shortage and macro-financial distortions that Ethiopia is facing. Ethiopian government has been in talks with the International Monetary Fund and the World Bank for more than a year for a bailout package. The latest round of talks was held in Washington around a month ago, but no agreement could be reached.

The high debt to GDP ratio is being attributed to loan payment concessions given to Ethiopian governmet by creditors. Ethiopia paid only 10% of its loan obligations in the first nine months of this fiscal year. It paid $52.1 million in loan repayments during the July-March period, despite having an obligation of $512 million. Read More…

Finance Minister Ahmed Shide this week said, “We have saved in our budget allocated to loan repayment due to the two-year interim debt suspension by the Common Framework and China amounting to $1.44 billion. We are also in negotiations for an interim debt repayment suspension of $0.49 billion. This has also helped us to narrow down the budget deficit.”

More military spending, more resource allocation for humanitarian activities and disruptions of economic activities in conflict areas are some of the factors leading to high debt to GDP ratio in Ethiopia.

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