8.4% of debt now in arrears
Since the launch of economic reforms approximately 18 months ago, Ethiopia’s debt has surged by nearly five billion dollars, with 8.4 percent of its total external debt now in arrears.
According to the latest debt analysis from the Ministry of Finance, the country’s outstanding debt reached 34.4 billion dollars as of December 31, 2025, up from 29.7 billion dollars at the beginning of the macroeconomic reforms initiated on July 29, 2024.
The report also indicated that external credit climbed to 4.76 billion dollars, reflecting a 16 percent increase compared to the amount when the reforms began in July 2024.
Currently, the government is in negotiations for debt restructuring under the OCC and enhanced HIPC frameworks. However, these discussions have been paused due to a default on euro bond repayments, which has resulted in arrears.
According to the Ministry of Finance, so far, 2.89 billion dollars—8.4 percent of the debt outstanding—has missed payment deadlines.
Despite being in debt restructuring negotiations, Ethiopia paid over half a billion dollars to creditors in the first half of the 2025/26 budget year.
The Ministry of Finance’s publicly available debt analysis, the first since the 2024/25 budget year’s first quarter review, noted that between July 1, 2025, and December 31, 2025, the total cost of servicing external public sector debt—including principal, interest, and fees—was 554.62 million dollars.
The analysis not only delays the publication of public debt figures but also omits key comparisons and data common in similar reports from previous periods.
It reported that the total external debt service paid by the central government was 311.41 million dollars (of which 230.26 million dollars was principal and 81.15 million dollars was interest), while state-owned enterprises, primarily Ethiopian Airlines, paid 243.21 million dollars.
Since 2017, Ethiopia has been classified as a debt-distressed nation.
Under the G20 common framework, the country has been engaged in debt restructuring negotiations with major official creditors since 2021, although a final bilateral agreement has yet to be reached.
Beginning with the 2024/25 budget year, Ethiopia has been implementing macroeconomic reforms supported by international partners providing funds to stabilize the country’s balance of payments.
The Ministry’s report indicated that in the first quarter of the budget year, the total principal payments made to external creditors were less than the total disbursements received from them. This is evidenced by net external debt resource flows (disbursements minus principal payments) of 399.34 million dollars from July 1, 2025, to December 31, 2025. Furthermore, subtracting disbursements from principal and interest payments resulted in a net resource transfer of 276.51 million dollars.
The net resource transfer is positive because the total debt service payment (principal plus interest) is less than the disbursement for the period.
According to the Ministry of Finance report, during the semi-annual period ending December 31, 2025 (from July 1, 2025, to December 31, 2025), the total amount of new loans signed was approximately USD 840.56 million. The central government accounted for 40% of this borrowing, while Ethiopian Airlines accounted for the remaining 60%. These new loans have an average grant element of 23.3% (53.26% for the Central Government and 8.24% for Ethiopian Airlines). Notably, there has been no non-concessional borrowing in the last eight years, except for Ethiopian Airlines.
Ethiopia applied for debt treatment under the G20 Common Framework on February 3, 2021, and an official creditors committee (OCC), co-chaired by China and France, was established on September 16 of the same year.
The OCC includes members from the Paris Club: Austria, Denmark, France, Israel, Italy, Japan, Korea, Sweden, South Africa, and Switzerland. Non-Paris Club members include China, the largest official creditor, as well as India, Kuwait, Saudi Arabia, and Turkey.
Although negotiations are nearing completion with a bilateral agreement, the Ethiopia Official Creditor Committee has agreed to suspend all debt service payments due between January 1, 2023, and December 31, 2024, for further debt restructuring. As a result, there were no payments for eligible debt service during this period.
On March 21, 2025, Ethiopia and the OCC reached an Agreement in Principle (AIP) on the key financial parameters for debt restructuring within the framework of the G20 Common Framework process.
Between July 1, 2025, and December 31, 2025, external public sector debt disbursements totaled USD 831.12 million, with the IMF and the World Bank IDA accounting for the majority of this amount. Most of the financing was directed toward balance of payment support and federal government projects, including aircraft purchases. Aside from Ethiopian Airlines, there were no external debt disbursements for State-Owned Enterprises (SOEs), which have not obtained any new loans in the past eight years.
