(Bloomberg) -- Ethiopia needs about $3.5 billion in relief from debt restructuring through 2027-28, according to the International Monetary Fund, setting the key parameters for creditors to negotiate deals with the government.
Overall, Africa’s second-most populous nation faces a financing gap of more than $20 billion over the period, the Washington-based lender said this week in a report outlining its $3.4 billion economic program. That reduces to $10.7 billion after actions including proceeds from privatization processes and an existing debt suspension with creditors, it said.
The residual financing gap and the contribution required from debt restructuring are both about $1 billion less than a preliminary estimate from the authorities last year.
Ethiopia is the fourth African nation seeking to restructure its debts under a Group of 20 process introduced in 2020 known as the Common Framework. That requires the government to have a program in place with the IMF to allow negotiations with creditors to begin in earnest. A deal with its official creditor committee should come within six months, State Minister for Finance Eyob Tekalign said by phone on Wednesday.
Countries that started the Common Framework earlier, especially Zambia, have faced frustrating and economically painful delays as talks dragged on. Because the mechanism seeks to bring new creditors like China and Saudi Arabia around the table with the traditional rich-country lenders of the Paris Club, the process has been slowed by technical hurdles and differences over established procedures.
Ethiopia’s talks may progress more quickly, given that Zambia and Ghana’s experiences have already helped to show where potential problems lie, and how to address them. Still, Ethiopia faces its own potential obstacles, especially as conflict simmers in some regions, and the government faces continuing criticism by advocacy groups over its human-rights record.
The IMF also sees Ethiopia getting $3.75 billion in budget support through 2027-28. Much of that will come from the World Bank, which this week pledged $16.6 billion of support through grants, concessional lending and investment in the private sector.
--With assistance from Paul Richardson.
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