Monday, February 17, 2025

Ethiopia sets April target for debt restructuring agreement under G20 common framework

By our staff reporter

For debt treatment under the G20 Common Framework (CF), the Ethiopian government has announced a new timeline for reaching a Memorandum of Understanding (MoU) with the Official Creditor Committee (OCC), stating that an agreement is expected by April.

During his recent visit to Ethiopia’s primary economic partner, Finance Minister Ahmed Shide met with Chinese commercial lenders and other creditors.

For the past four years, Ethiopia has been negotiating debt re-profiling with G20 countries under the CF framework. Although the government anticipated observable outcomes by the end of last year, it has not yet reported any progress.

According to the latest statement released after the completion of the second review of the 48-month Extended Credit Facility (ECF) by the Executive Board of the International Monetary Fund (IMF), the government is aiming to achieve results by April.

In July, after receiving assurance from the OCC for debt re-profiling, the IMF approved USD 3.4 billion under the ECF.

After the board meeting, Deputy Managing Director Nigel Clarke remarked, “The significant progress made towards reaching an agreement on a debt treatment with the OCC under the G20 Common Framework is an important step towards restoring debt sustainability.”

The IMF noted that by the time of the third assessment, the Ethiopian authorities aim to have an approved MoU in place.

It is worth mentioning that the administration had informed the IMF that it expected to finalize a deal with creditor countries by the time of the second review last month.

Furthermore, the authorities are eager to pursue similar treatments for holders of Eurobonds and other foreign commercial debts.

The responsibility for negotiating Ethiopia’s lengthy debt restructuring rests with the G20’s CF creditor group for Ethiopia, which is co-chaired by China and France.

This week, a delegation led by Finance Minister Ahmed, which included the Prime Minister’s macroeconomic advisor Girma Biru (Amb), visited China, one of Ethiopia’s largest bilateral creditors that also provides commercial loans.

Reports from the Ethiopian Embassy in China indicate that the delegation met with representatives from the China Development Bank (CDB), Exim Bank of China, the International Industrial and Commercial Bank of China (ICBC), and other officials from the Chinese Ministry of Finance and state enterprises to discuss economic cooperation and strengthen the two nations’ all-weather strategic partnership.

The financial institutions visited by Ahmed’s delegation are significant creditors that also hold undisbursed credits; however, China has been delaying new loans over the past few years.

According to the Ministry of Finance (MoF), Ethiopia is seeking USD 1.4 billion, or 14%, of the total USD 9.9 billion in undisbursed fresh credit from the Chinese government. Additionally, it is anticipated that Chinese financiers, such as ICBC and CDB, will provide an extra 8.8% of the total undisbursed loan, amounting to USD 870 million.

“The forecasts include re-profiling of debt payments of USD 1.4 billion due to all official bilateral creditors in 2023 and 2024,” the MoF recently stated, referring to the significant temporary relief provided by the debt service standstill agreement reached with OCC members at the beginning of the previous budget year.

However, the anticipated USD 3.5 billion in debt treatment under the CF totals USD 4.9 billion in debt relief.

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