Ethiopia denies intentions to implement debt treatment exercise

Ethiopia denies intentions to implement debt treatment exercise

The Ministry of Finance of Ethiopia has denied recent press reports of its intentions to implement debt treatment exercise to its public external debt.

In its press statement the Ministry recalled that since June 2020, Ethiopia has signed a Memorandum of Understanding with the Paris Club under the auspices of the G20 Debt Service Suspension Initiative (“DSSI”), as amended in December, and negotiated similar debt service suspension agreements with its non-Paris Club bilateral creditors.

“The objective is to weather the impact of the Covid-19 crisis and create additional fiscal space to mitigate the impacts of the pandemic. In November, the G20 adopted a common framework for debt treatments beyond DSSI (the “Common Framework”), designed to facilitate timely and orderly debt treatment for DSSI-eligible countries with broad creditor participation. In the context of its ongoing Homegrown Economic Reform Agenda and the IMF program initiated in December 2019, Ethiopia aims to reduce debt vulnerabilities and lower the risk of debt distress to moderate by the end of the program,” the Ministry said.

“To achieve this objective, the Ministry will utilize all mechanisms at its disposal, including the Common Framework. Ethiopia has already been very active in undertaking proactive liability management exercises in the past few years and intends to keep managing its public and quasi-public debt portfolio in the most prudent way. In view of the above, the Ministry is currently updating its public debt sustainability assessment with the assistance of the IMF and preparing for upcoming discussions with official creditors,” it said.

“Only once these discussions are completed will the Ministry be in a position to inform its other creditors of the need for broader debt treatment discussions in accordance with the comparability of treatment rule. The Ministry of Finance is confident that the possible implementation of the debt treatment under the Common Framework will address the debt vulnerabilities of the country, while preserving long-term access to international financial markets, thus unlocking more growth potential,” the statement concluded.