The International Monetary Fund says extending external-loan repayments over a longer period will help Ethiopia ease debt risks in the future.
In an initial assessment, the IMF and the World Bank concluded that Ethiopia’s debt is sustainable, according to the fund’s Africa department Director Abebe Aemro Selassie.
The preliminary sustainability assessment is a key step for the Horn of Africa nation to rework its public debt under a Group-of-20 program to ease repayment burdens of poor countries hit by the coronavirus pandemic.
Ethiopia, Chad and Zambia have signed up to the so-called G20 Common Framework, which is available for 72 of the world’s poorest countries.
“Ethiopia’s debt is assessed to be sustainable, but a re-profiling of debt service in coming years over a longer period will enable a moderate risk of debt distress to be reached by the end of the Fund-supported program,” Selassie said in an interview. The IMF’s analysis of liquidity needs will help inform the country’s creditors committee, which hasn’t yet met, to decide on the type of debt relief.
Ethiopia’s Eurobonds tumbled after the country announced on Jan, 29 its intentions to restructure its external debt.
State Minister for Finance Eyob Tekalign Tolina has said the country has not decided how Eurobond-holders will be treated, but vowed a “market-friendly” solution to guarantee access to markets in debt coming debts.
Yields on the nation’s 2024 Eurobonds fell 13 basis points on Thursday to a two-month low.