Ethiopia shifts from commercial to concessional loans on foreign debts

Ethiopia is currently negotiating with its creditors to convert commercial loans into concessional loans, which could significantly lower its debt interest rates.

During a recent address to parliament, Prime Minister Abiy Ahmed stated that the nation's foreign debt has been reduced to less than $23 billion, prompting a halt on new commercial loan acquisitions.

He outlined the government's strategy for managing foreign debt, focusing on restructuring existing loans to more favorable concessions.

This initiative comes in the wake of previously implemented macroeconomic reforms that have already enabled the restructuring of between $4 billion and $4.5 billion in foreign loans.

The Prime Minister also noted that G-20 creditors are supporting Ethiopia's restructuring efforts. However, Eurobond holders are pushing for repayment under the original commercial terms, given the country's rising export revenues. In response, Ethiopia is advocating that these debts be managed under the Common Framework Agreement, which provides more favorable loan terms.

As the second-largest economy in East Africa, Ethiopia began discussions last year to address its debt repayment challenges. As of September, the country's total external debt was reported to be over $23 billion, with private creditors holding just around 5% of it – the remainder consisting primarily of a $1 billion Eurobond.