December Key Month For Debt Restructuring Hopes: NBE

– Creditors awaiting second IMF country review

Central bank regulators anticipate Ethiopia’s second country review under the four-year International Monetary Fund (IMF) program to pave the way towards the execution of long-awaited debt treatment plans.

A staff-level agreement concluded last week between federal authorities and IMF staff, and tied to the second review under the Extended Credit Facility (ECF) program launched in August, sets the stage for the country’s debt restructuring prospects, according to officials.

A full report detailing the second review is scheduled to come out next month.

During recent discussions, regulators at the National Bank of Ethiopia (NBE) told members of the Addis Ababa Chamber of Commerce and Sectoral Associations that creditors are examining the country’s eligibility for extensions on maturing debts.

– Advertisement –

“Debt restructuring stands at the center of our reform plans. We believe that rescheduling will begin right after the release of the report. Official creditors are also waiting for that,” said Habtamu Workneh, External Economic Analysis & International Relations Directorate Director at NBE.

He revealed that most treatment plans centered around Ethiopia focus on maturity date extensions, and added that the IMF-backed arrangement has funneled USD 2.5 billion into the country so far this fiscal year.

Habtamu expects the debt restructuring process to begin in December.

The first IMF review specified that authorities had committed to working towards reaching an agreement in principle with official creditors by the time of the second review and with bondholders as soon as feasible after that.

It also states that Ethiopian authorities have been actively engaging with Eurobond holders on the need for debt restructuring on comparable terms to the arrangement with official creditors.

The IMF document reveals that a debt restructuring proposal was submitted to Eurobond holders in July following discussions in December 2023 and May 2024. The report also confirms that authorities organized a global investors callback on October 1 to update bondholders about the latest macroeconomic developments and the debt restructuring discussions with the Official Creditors Committee (OCC).

Recently, Fitsum Assefa (PhD), minister of Planning and Development, stated that the government had completely weaned itself off commercial loans and direct borrowing from the central bank.

She also claimed the external debt-to-GDP ratio has dropped to 13.7 percent.

However, experts contend the ratio dropped due to the government’s inflated GDP growth figures.

The Debt Sustainability Analysis prepared by the IMF and the International Development Association (IDA), in consultation with the authorities and published in July indicates that Ethiopia’s external debt-to-GDP ratio as of end of June 2023 amounted to 18 percent.

The external debt accounted for 45 percent of total public and publicly guaranteed debt, according to the report.

The announcements about the government’s borrowing habits also included a statement that it is looking for nearly USD one billion to finalize the Koysha Hydroelectric Dam project, which has been idled at two-thirds completion due to a lack of finance.