WAR AFTERMATH
By AFP
Posted on November 30, 2023 13:08
Ethiopia’s Central Bank Governor Mamo Mihretu.
The finances of Africa’s second most populous country have been hit by the two-year conflict in the northern region of Tigray.
Cash-strapped Ethiopia has secured a $1.5bn debt relief agreement with creditors, its central bank chief said, temporarily easing the country’s financial burden as it seeks a wider funding programme.
The accord was announced on Wednesday by National Bank of Ethiopia governor Mamo Mihretu and confirmed in a statement from the Paris Club of creditor nations on Thursday which described it as an “important achievement”.
“We’ve been able to achieve an interim debt service suspension and therefore able to save around $1.5bn that would have gone to debt servicing,” Mamo told a parliamentary committee.
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The finances of Africa’s second most populous country have been hit by the two-year conflict in the northern region of Tigray that ended with a peace deal in November last year.
Ethiopia has said it needs around $20bn to rebuild northern Ethiopia after the war that claimed the lives of around half a million people, according to US estimates.
The landlocked country has about $28bn of external debt and is also grappling with sky-high inflation at and a shortage of foreign currency reserves.
The debt relief agreement was reached with bilateral creditors, including China which has loaned Ethiopia around $14bn according to analysts.
“This debt standstill from Ethiopia’s official bilateral creditors will provide time-limited liquidity relief ahead of discussions on a wider debt treatment,” the Paris club said in a statement.
Landlocked Ethiopia has been in discussions with the International Monetary Fund for a programme of financial support for its economic reforms.
But the economy has deteriorated sharply in recent years and the will to continue the reforms has largely stalled.The Fitch Ratings agency earlier this month downgraded Ethiopia’s debt further into junk territory to CC, a level it said “reflects a probable risk of a default event”.