Ministry Celebrates Step Forward In Debt Restructuring Quest

By Kidus Dawit

After years of slow progress in its efforts to secure a restructuring of Ethiopia’s foreign debt, the Ministry of Finance has announced it has reached an agreement in principle with its Official Creditor Committee on a debt treatment under the G20 Common Framework.

A statement released by the Ministry on Friday indicates the treatment will cover approximately USD 8.4 billion of outstanding public debt, approximately 30 percent of what the country owes to external creditors.

Officials have been hinting that an agreement with the Committee was close to fruition following the start of the International Monetary Fund (IMF) program eight months ago.

An IMF program was part of the preconditions laid down by creditors when they approved a proposal for a two-year pause in foreign debt payments in December 2023. The approval coincided with Ethiopia’s failure to make good on a coupon payment for its USD one billion Eurobond.

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At the time, creditors agreed to provide a two-year grace period beginning 2025 before the suspended payments and accrued interest are due in full over a total of six installments between 2027 and 2029.

Whether that arrangement will remain in place in light of the latest agreement remains to be seen.

However, officials seem pleased by the progress.

“The agreement marks a significant milestone in our efforts to normalize our relations with international partners and deliver economic stability to the Ethiopian people. We extend our sincerest appreciation to the OCC and its co-chairs for the unwavering support in resolving our country’s public debt situation,” reads a statement issued by Finance Minister Ahmed Shide.

Still, the agreement is far from official, with the Ministry expecting to sign a Memorandum of Understanding with creditors before inking separate bilateral agreements with each member of the OCC.

“The government looks forward to a prompt implementation of the agreed terms,” reads the Ministry’s statement.

In 2024, Ethiopia’s external debt stood at USD 28.4 billion.