In comparison to the previous quarter, the external debt decreased in the third quarter of the just-ended budget year, while the direct advance (DA) has increased by more than 50%, which is not in line with the government’s policy.
In comparison to the previous quarter that closed in December 2023, the foreign debt stock decreased by 0.5 percent over the given period.
The Ministry of Finance’s (MoF) quarterly debt bulletin, which examined the debt stock for the first nine months of the 2023/24 budget year, showed that as of March 30, 2024, the foreign debt stock was recorded at USD 28.389 billion, down from USD 28.537 billion in December last year.
The debt stock decreased by USD 148 million in the third quarter, which ended on March 31, 2024, although it climbed by 0.5% when compared to the amount at the end of June 2023, the conclusion of the 2022/23 budget year.
As of June 30, 2023, the debt stock was over USD 28.25 billion.
As of March 31, 2024, the government-guaranteed and non-guaranteed state-owned enterprises (SOEs) owed 20.2 and 9.3 percent of the nation’s external debt, respectively, with the central government holding 70.4 percent of the debt.
“As per usual, IDA accounted for the majority of the total amount of external public sector debt disbursements, which totaled USD 994.63 million between July 1, 2023, and March 31, 2024,” the MoF bulletin said.
The budget year’s third quarter saw just USD 314 million distributed. The quarterly report states that less foreign financing has been disbursed recently than it has in the last two years.
“SOEs have not received a new loan in the last four years and are disbursing less and less for their older projects as they near completion and the amount of money disbursed to them decreases, as well as less disbursement from our Chinese creditors,” it reads, with Ethiopian Airlines (EAL) being the only exception.
The principal, interest, and fees for servicing foreign public sector debt were USD 812.8 million between July 1, 2023, and March 31, 2024.
The central government contributed USD 418.19 million (USD 313.25 million principal and USD 104.94 million interest) toward the overall servicing of the external debt, while SOEs, mostly EAL, paid USD 394.61 million.
Unlike the previous several years, the inflow has exceeded the outflow for the first two quarters in a row.
Recall that the government received a debt servicing halt from China and Paris Club countries for the budget year.
As of March 31, 2024, the total domestic debt stood at 2.12 trillion birr, up 10.47 percent from 1.91 trillion birr on June 30, 2023.
According to the statement, “SOEs hold 39% of the total domestic public debt, with the central government holding the remaining 61 percent.”
As of March 31, 2024, the stock value of the recently introduced domestic debt instrument had reached 80.26 billion birr.This debt instrument was launched in compliance with Directive No. MFDA/TRBO/001/2022, which requires all commercial banks to purchase a five-year treasury bond at 20% of their new loan disbursement.
The directive was issued in late 2022. In comparison to the previous quarter, the sum rose by over 14.6 billion birr; moreover, it grew by 110 percent, or 42 billion birr, from the June 2023 level. On June 30, 2023, it was 38 million birr.
As of June 30, 2023, the total outstanding amount for direct advance was 130 billion birr. That amount had climbed to 197 billion birr on March 31, 2024.
The government decided approximately a year ago to cap the rise of the DA at a third of the level of the previous year.
Nonetheless, compared to the end of the previous budget year, the DA has climbed by 51.5 percent, or 67 billion birr, in the first nine months.
The DA grew from 167 billion birr on December 31, 2023, to 197 billion birr in a single quarter. The governor of the National Bank of Ethiopia, Mamo Esmelealem Mihretu, said in August of last year that the MoF and the bank had established an understanding to use the DA facility only in the event that the market is unable to generate enough Treasury Bills and Treasury Bonds.
The overall amount of outstanding Treasury Bills climbed by 13.5 percent to about 388 billion birr on March 31, 2024, from 342 billion birr on June 30, 2023, according to the most recent MoF debt report.
Due to inadequate funding from outside partners over the last four years, the government has been compelled to turn inside, especially to DA, in order to close the budget shortfall.
Three local loan instruments, T-bills, Treasury Bonds, and DA, have yielded 155 billion birr to the government throughout the specified time.
The total amount of domestic and overseas public sector debt climbed by 3.9 percent to USD 65.8 billion on March 31, 2024, from USD 63.3 billion on June 30, 2023.
“This is because the public sector’s external debt climbed by 0.5 percent, while domestic debt increased by 6.7%,” the report said.
At the reported period, public sector debt accounted for over 40.3% of nominal GDP, with external debt accounting for nearly 17.4%. “Both percentages are much lower than the debt sustainability thresholds for low-income countries, which are 40% for external debt and 55% for total public sector debt in a medium debt carrying country.”
