Ethiopia has reached a pivotal agreement with creditors to restructure a substantial $8.4 billion of its debt, the finance ministry announced Friday.
The East African nation, burdened by approximately $30 billion in external debt, has been engaged in intense negotiations since 2021 seeking debt relief.
Its economy suffered significant blows from the Covid-19 pandemic, the conflict in Ukraine, and a devastating internal civil war.
Finance Minister Ahmed Shide hailed the preliminary agreement as a “significant milestone” in normalizing international relations and fostering economic stability.
The debt restructuring was negotiated under the G20 “Common Framework,” a mechanism designed to assist struggling nations with debt cancellation under stringent guidelines.
Ethiopia’s default on certain debt payments in late 2023 underscored the urgency of this agreement.
Economic analyst Samson Berhane described the deal as a “major victory” for the Ethiopian government facing significant debt maturities this year.
He noted this measure would conserve crucial foreign exchange reserves and mitigate a widening balance of payments deficit.
Prime Minister Abiy Ahmed has been pursuing ambitious economic liberalization reforms since assuming office in 2018.
The International Monetary Fund approved a $3.4 billion aid package in July, contingent upon Ethiopia liberalizing its currency.
Despite this progress, the nation continues to grapple with high inflation, projected to reach 23.3 percent in 2025.
This debt restructuring offers a vital lifeline for Ethiopia’s economic recovery efforts.