Gov’t pays higher dues to narrow debt matrix

Despite the external flow which was expected to way heftily on government, the country has been able to steer itself to settle over 15 percent of higher external debt in the first nine months of the budget year when compared with the same period of last year. The debt settlement is higher than the new flow that contributes to reduce the external debt rate.
In spite of the internal and external thorns that poke the country’s economy, the Ethiopian government has continued with its high commitment to settle its international debt.
According to the latest public sector debt statistics bulletin which was analyzed and issued by the Debt Management Directorate of the Ministry of Finance; in the first nine months of the budget year that closed March 31, the country has settled over USD 1.64 billion to international creditors.
Of the total amount settled during the nine months, close to USD 1.3 billion was principal whilst USD 378.8 million was interest payments.
In comparison to last year’s third quarter report, the debt service had an increment of 15.13 percent. In the 2020/21 budget year, in the first nine months, the government settled about USD 1.43 billion.
As is customary, the major portion of debt service was dominated by state owned enterprises (SOE) and the remaining payment was the share of the central government.
In the stated period, SOE’s paid USD 1.22 billion which is a slight reduction when compared with the same period of last year.
At the end of March 2021, SOE’s debt settlement was USD 1.25billion which is higher by USD 29 million or 2.3 percent compared with this year’s nine month performance on the sector.
However, the central government service has significantly increased compared with the same period of last year.
The bulletin indicated that in the nine months the central government service had spiked to USD 425.6 million which is an increment of 136 percent when compared with USD 180.6 million made the same period of last year.
Over the last nine months that started July 1, the total external public debt disbursement was USD 774.85 million, with about 64 percent going to central government projects from various creditors, the majority of which came from IDA, and the remaining 36 percent went to SOEs mostly to Ethiopian Airlines.
In comparison to the previous four years, the total amount of external funding disbursed in the last one and a half years was significantly lower.
“One of the reasons for the decrease in disbursement is that SOEs have not borrowed in the last three years and are disbursing less and less for their older projects as they near completion while their undisbursed balance decreases,” the Debt Management Directorate quarterly bulletin read.
During the last three quarters, only three loan agreements have been signed with partners, one for a central government project and the other two for Ethiopian Airlines Aircraft purchase, totaling USD 290.74 million, with the majority being borrowed by Ethiopian Airlines (USD 279.52 million) and the remaining USD 11.22 million by the central government.
The decrease in external total public sector debt was about USD 1.03 billion, or it decreased by 4 percent; one reason for this decrease in stock of debt can be explained by USD exchange rate variation, which is a relatively stronger USD against other foreign currencies during March 2022 compared to June 2021, which the last month of the past budget year, resulted in reducing the debt stock in terms of USD, which is approximately USD 541.04 million.
“Another reason for the debt stock’s decline is that principal payments were higher than new disbursements, resulting in a negative net flow of USD 492.0 million,” the bulletin explained.
During the last three quarters, the net external debt resource flows (Disbursement-Principal payments) are negative (USD – 492.00 million), implying that the amount of disbursement from external sources (inflow) is less than the total external principal payments to creditors (outflow), and the net resource transfer, which is disbursement (inflow) minus principal payments minus interest payments, is USD – 870.81 million.
As of March 31, 2022, total public sector external debt was USD 28.45 billion, compared to USD 29.48 billion as of June 30, 2021.
Nominal external debt in percent of GDP was around 25.6 percent; present value of external debt in percent of GDP was around 18.7 percent.
External debt makes up around 49.9 percent of overall government debt, while the central government is responsible for 67.5 percent of the entire external debt, while SOEs with government guarantees and without government guarantees are responsible for 21.8 percent and 10.6 percent respectively.