Assessment of Ethiopia’s debt situation

The main financiers to Ethiopia are reportedly backing out or delaying several financing agreements due to concerns that the country won’t be able to repay loans.

Reports indicate that these institutions and organisations are withholding more than USD 11 billion in loans. 

As an example, China’s Eximbank has withheld funding amounting to more than USD 339 million.

According to a report on the first three quarters of the previous fiscal year, the International Development Association also withheld more than USD 3.3 billion. That amount still hasn’t been provided to Ethiopia.

The same report shows the same dynamic for USD 2.7 billion from the International Monetary Fund and USD 1.4 billion from China as a whole. 

If this dynamic continues, experts warn that the vast majority of projects being implemented in the country might be stalled or even halted. This is especially a risk for agricultural, transportation, communication, urban road, and railway projects. These projects, it is said, require a total of USD 675 billion for successful completion.

Of course, Ethiopia’s request for the implementation of the G20 debt suspension framework plays a huge factor in this. During the first 3 quarters of the previous budget year alone, Ethiopia had borrowed USD 29 billion; 27 percent of the country’s GDP. 

While experts and several global financial organisations deemed the move detrimental to the country’s global financing operations some, like IMF Spokesperson Jerry Rice, recognise the move as a necessary one.

Whether it will end up helping the country or further aggravating its financial woes, only time will tell.

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