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Ethiopia Sees Debt Process Reprofiling $4.9 Billion of Loans

Addis Ababa, Ethiopia. Photographer: Michele Spatari/AFP/Getty Images (Michele Spatari/Photographer: Michele Spatari/AF)

(Bloomberg) -- Ethiopia expects its creditors will agree to restructure $4.9 billion of debt, Planning and Finance Minister Fitsum Assefa said.

The authorities in East Africa’s biggest economy have resumed talks to reduce its debt-repayment burden by lengthening maturities after agreeing a reform program with the International Monetary Fund.

“We have managed to secure $4.9 billion in debt restructuring, which will lower the country’s debt exposure from high-risk to medium-risk,” according to remarks by Fitsum aired by the state broadcaster on Thursday. “Upcoming discussions may include debt cancellation, and by the end of this reform process, we expect a significant improvement in Ethiopia’s debt stress.” 

She didn’t elaborate and the ministry didn’t respond to a request for comment. The IMF sees Ethiopia needing about $3.5 billion of debt relief during the program.

Prime Minister Abiy Ahmed said at the same meeting that Ethiopia’s $1 billion eurobond debt that matures in December will be reduced to $800 million. He didn’t elaborate.

“One viable option being considered among others is a nominal reduction,” Eyob Tekalign, state minister in the finance ministry, said when asked for comment on Abiy’s remarks. “Savings from debt reductions are projected based on the options presented by the official creditor committee.”

Ethiopia, like Zambia and Ghana, is restructuring its loans under a Group of 20 mechanism introduced in 2020 known as the Common Framework. The process requires borrower governments to seek at least as much debt relief from private creditors to that official bilateral creditors provide.

A memorandum of understanding with bilateral creditors, which will spell out any extensions in duration, reduction in debt service and if necessary, lowering of the present value, should be in place before the second review of the IMF program in December, according to a program report.

Those parameters will guide how relief is offered by other official and private creditors. Ethiopia owes external creditors about $28.9 billion, a quarter of which is to China.

--With assistance from Jorgelina do Rosario and Matthew Hill.

(Updates with minister’s comment on eurobond in seventh paragraph)

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