The Paris Club Creditors has welcomed the agreements reached between Ethiopia and its official bilateral creditors to provide the country with a temporary debt standstill. However, if a Staff-Level Agreement (SLA) has not been reached between the Ethiopian authorities and the IMF by 31 March 2024, the Official Creditor Committee (OCC) reserves to right to declare the suspension null and void and postpone this date if it deems it necessary.
In a statement, the Paris Club said it commends the bilateral agreement between China and Ethiopia as well as the broader agreement coordinated by the OCC under the Common Framework. This OCC agreement suspended debt service payments due from Ethiopia to other official bilateral creditors from January 2023 to December 2024.
The terms of the debt standstill, which are similar to those of the G20's Debt Service Suspension Initiative, were finalized between Ethiopia and the OCC on November 23rd. The agreement will provide Ethiopia with much-needed liquidity relief over the next two years.
Central bank governor, Mamo Mihretu, said in an address to lawmakers on November 30 that the decision would save 1.5 billion dollars that was meant to be paid for annual debt servicing.
Creditors participating in the OCC agreement include representatives from Austria, Denmark, France, Israel, Italy, Japan, Korea, Sweden, South Africa, and Switzerland. China will implement its own distinct terms bilaterally with Ethiopia.
Suspended debt payments will be repaid over a three-year period from 2027-2029 after a two-year grace period. The Paris Club stated this standstill will create space for discussions on a wider debt treatment for Ethiopia as the country works to agree an IMF program.
The debt relief efforts demonstrate creditors' collaborative approach to finding coordinated and sustainable solutions to Ethiopia's payment difficulties, according to the Paris Club. It strongly welcomed this important milestone in support of Ethiopia's debt sustainability.