Ethiopia has reached an in-principle agreement with creditors to restructure $8.4 billion in debt, the country’s finance ministry announced on Friday.
The deal marks a critical step for the East African nation, which has struggled with nearly $30 billion in external debt.
Negotiations for debt relief began in 2021 as Ethiopia grappled with economic setbacks from the Covid-19 pandemic, the Russia-Ukraine war, and a brutal civil war from 2020 to 2022.
The financial strain led to a default on some repayments at the end of 2023.
Finance Minister Ahmed Shide called the agreement a “significant milestone” in restoring relations with international partners and stabilizing the economy.
The restructuring falls under the G20’s Common Framework, a program launched in 2020 to assist heavily indebted nations under strict financial conditions.
Ethiopia joins Chad, Ghana, and Zambia in utilizing the framework to ease repayment burdens.
Economic analyst Samson Berhane described the agreement as a “major victory” for Ethiopia, highlighting that it will conserve foreign exchange reserves and prevent a widening balance of payments deficit.
Since taking office in 2018, Prime Minister Abiy Ahmed has pursued ambitious economic liberalization efforts in the state-controlled economy.
The International Monetary Fund approved a $3.4 billion aid package in July after Ethiopia agreed to currency liberalization.
Despite these reforms, economic challenges persist. Inflation remains high, with projections reaching 23.3 percent in 2025.
However, the latest debt restructuring offers a crucial lifeline as the nation navigates financial recovery.
