After over two years of stalled progress under the G20 Common Framework process, Ethiopia has achieved a breakthrough in its efforts to restructure debts with bilateral creditors.
Ethiopian Prime Minister Abiy Ahmed met with Saudi Crown Prince Mohammed bin Salman today, where an agreement was reached for Saudi Arabia to assist Ethiopia with debt restructuring.
“Our two countries have many strategic interests to cooperate on and to this end we have reached an understanding to establish a high level joint ministerial committee; for Saudi support on Ethiopia’s macroeconomic reforms through debt restructuring; energy cooperation and development finance and investments,” Abiy said.
Ethiopia requested debt relief from external creditors under the Common Framework in 2020, but little headway has been made due to delays in analytical work and the conflict in Tigray. Recognizing the need for urgent relief, Ethiopia began direct bilateral negotiations outside the framework.
While negotiations at the Common Framework level remain unfinished, the Saudi support indicates Ethiopia is making progress engaging creditors directly. Officials believe achieving bilateral agreements could help catalyze a comprehensive treatment under the G20 debt relief initiative.
China has also recently agreed to allow Ethiopia to suspend debt service payments for one year, after direct negotiations outside of the formal Common Framework process.
Debt relief is a top priority for Ethiopia’s government to stabilize its public finances and support reforms, investment and growth going forward.
Fitch credit rating agency recently estimated that sovereign external principal and interest payments at USD1.0 billion in the fiscal year ending 7 July 2024 (FY24) and USD2.0 billion in FY25, with a USD1 billion Eurobond maturing in December 2024.