The International Monetary Fund (IMF) estimates that Ethiopia needs about $3.5 billion in debt relief through restructuring by 2027-28. This amount provides a framework for creditors to negotiate with the Ethiopian government.
Ethiopia has a financing gap of more than $20 billion during this period. However, when considering money from privatization businesses in Ethiopia and current debt relief, this gap is lowered to $10.7 billion. Notably, this revised figure and the required contributions from debt restructuring are about $1 billion lower than the estimates from Ethiopian authorities last year.
Ethiopia is the fourth African country trying to restructure its debts under a G20 plan called the Common Framework. To start serious talks with creditors, the government must have a program approved by the IMF. Officials expect to reach an agreement with their creditor committee within six months.
Countries like Zambia, which have previously participated in the Common Framework, have encountered significant delays and economic challenges during their negotiations. These issues arise from the need to involve new creditors, such as China and Saudi Arabia, alongside traditional lenders from the Paris Club, leading to technical difficulties and procedural disagreements.
Ethiopia’s negotiations may proceed more smoothly, as the experiences of Zambia and Ghana have already highlighted potential challenges and solutions. However, the country still faces its own obstacles, including ongoing regional conflicts and criticism from human rights organizations.
The IMF projects that Ethiopia will receive $3.75 billion in budget support through 2027-28, primarily from the World Bank, which has committed $16.6 billion in various forms of assistance.
Last week, Mamo Mehretu, the governor of the National Bank of Ethiopia (NBE), announced that the bank had received $2.5 billion from the International Monetary Fund (IMF) and the World Bank. This money will help improve Ethiopia’s financial situation and support important economic changes.
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