Ethiopia will secure $4.9 billion in debt repayment relief upon completing its current restructuring efforts, State Finance Minister Eyob Tekalign announced on Friday.
The East African nation is reviving its long-delayed debt overhaul with the support of a new International Monetary Fund (IMF) financing program.
“We will finalize agreements with each creditor country over the next few months,” Eyob told media, referring to the anticipated savings.
As of March 2023, Ethiopia’s total external debt was $28.38 billion, according to finance ministry data.
Prime Minister Abiy Ahmed recently addressed the public about ongoing economic reforms, highlighting $200 million in savings from restructuring a $1 billion Eurobond.
Abiy also defended the recent shift to a market-determined foreign exchange rate, aiming to close the gap between official and black market rates, denying it was a devaluation of the birr. The central bank allowed the birr to float freely on Monday, meeting a key IMF condition and facilitating the debt restructuring process.
Since then, the birr has depreciated by 31.5% against the dollar, trading at 83.94 per dollar, according to the Commercial Bank of Ethiopia. This has raised concerns about potential inflation spikes.
Abiy emphasized the need to unify the exchange rates to prevent economic dangers posed by the wide gap between the two markets.
The policy shift helped Ethiopia secure the IMF deal and funding from other creditors, including the World Bank. However, concerns about inflation’s impact on low-income households have led some local governments to crack down on price hikes in shops.
The government and its creditors believe that liberalizing foreign exchange will enhance the private sector’s contribution to the economy and boost long-term growth.
