Tuesday, May 21, 2024
BusinessEthiopia adjusts for ‘temporary debt suspension’

Ethiopia adjusts for ‘temporary debt suspension’

– Awaits announcement for temporary solution this month as debt restructuring delays

– Finance State Minister ditches Fitch’s recent report

Officials at Ethiopian Ministry of Finance are confident over a positive announcement from the G20 Common Framework for their request of a temporary debt suspension solution, which they expect to come by the middle of this month.

The temporary debt suspension is devised to ease the country’s strained debt service burden, as Ethiopia’s request for debt restructuring under the G20 Common Framework is delayed by more than two years.

According to Eyob Tekalign (PhD), Finance State Minister and member of the National Macroeconomic Committee, a positive nod secured from the Common Framework for Ethiopia’s temporary debt suspension request until the long-overdue quest for debt re-profiling materializes.

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In an interview The Reporter Magazine conducted with the State Minister earlier this week, Eyob explained how Ethiopia’s push for debt re-profiling for the last few years couldn’t be finalized.

“We have been waiting, but the system is not delivering as fast as it should,” he said. “Until that [request for debt re-profiling] delivers, we have asked for temporary debt suspension. We are hoping that there will be a positive response to that, probably this week,” he said.

As a proposal for the next step and part of the broader G20 Common Framework discussion, he has been pleading along with his colleagues for a temporary solution, pertaining to a debt suspension for up to two years.

Since the G20 countries established the Common Framework in late 2020, its implementation has been criticized for being slow.

Among the four countries that have requested debt treatment under this programme, all of which are African countries including Ethiopia, only two of them have reached an agreement with the programme to restructure their debt burden. Ethiopia made the request in February 2021, and there has not been any agreement yet, as no light in the tunnel for IMF’s staff-level agreement.

From the longer process of debt restructuring, the government of Ethiopia expects a payment period extension by 10 to 15-years. According to the State Minister, Ethiopia has been trying to do sustainable, manageable, and “in fact responsible debt management.”

The delay in their request has prompted even the heads of international financial institutions to find a temporary solution. “In fact, it isn’t even our request. It is a request from the Global Forum of the G20,” Eyob explained.

According to the State Minister, the President of the World Bank and the Managing Director of the International Monetary Fund (IMF) are the ones who proposed the idea of Ethiopia requesting a temporary solution, saying, “we have not delivered on this; there must be some temporary solution for developing countries.”

Ethiopia’s quest for a temporary debt suspension solution is “strongly advocated by the Global Debt Round Table,” the per-annum table coached by the World Bank, IMF, and G20 Presidency. “Our coachers have supported this, and they are hoping that there will be significant progress this month,” he expressed his hope. 

Eyob seems unconcerned about the recent report by Fitch Ratings, which downgraded Ethiopia from CCC- to CC and puts Ethiopia at risk of defaulting on its debt services. He criticized the credit rating agencies for focusing only on making headlines, not the full context of things.

“The rating agencies just focused on the request, not the broader objective behind it. I am not worried at all, and it wouldn’t also affect our request,” he said, adding “because we are asking to manage our debts in a more responsible way possible.”

Once the suspension is fully effective, Eyob and his team are hopeful for the news to change.

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