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Ethiopia to avoid non-concessional loans

Ethiopia to avoid non-concessional loans

This year’s debt repayment reaches 16 billion birr

After shunning repeated call from the International Monetary Fund (IMF) and the World Bank Group (WBG) to limit commercial borrowing, and feeling the pressure of the accumulated external debt of Ethiopia, the Ministry of Finance and Economic Cooperation (MoFEC) has decided to strictly avoid non-concessional loans from foreign creditors for an unspecified period of time, The Reporter has learnt.

According to a recent Article IV Consultation Report by the IMF, Ethiopia’s accumulated domestic and external debt is projected to hit 59 percent of the GDP, showing a three percent increase from last year’s. The external debt stock alone is USD 25 billion; however, this figure do not necessarily reflect the amount of commercial or non-concessional loans contracted by public enterprises due to government’s long-standing procedure to leave public enterprises’ debt out of official debt statistics. Furthermore, the figure is also not reflective of the debt accumulated by government entities through unofficial channels.

According to MoFEC, no commercial loans have been accessed this year; and it was the WB that has been providing concessional loans to government’s projects. Haji Ibssa, public relations director with MoFEC, confirmed to The Reporter that the government has cautioned its mounting external debt and is rather focused on debt repayment or debt servicing, this year.

Hence, out of the 16 billion birr which is required to fulfil country’s debt servicing obligations for the current Ethiopian fiscal year, some 11 billion birr has been settled so far, Haji told The Reporter. In addition to that, MoFEC has warned public enterprises such as Ethiopian, Ethio Telecom and others to pump the breaks on their foreign borrowing activities for this year.  Pundits regard the 16-billion-birr debt servicing obligations as just a slice of the amount the country owes to bilateral and multilateral sources. Some experts approached by The Reporter estimate the amount of money indicated to be merely the interest rates; and not the principal amount.

Including domestic and external borrowing, the federal budget allocated for public agencies and regional states this year stood at 450 billion birr, which is equivalent to USD 16.67 billion (at the current exchange rates).

In related news, MoFEC and Development Partners for Service Delivery Group have conducted their biannual joint review meeting this week and in the meeting public finance management system was reported to be high on the agenda. They have reviewed the conditions of public procurement, the way the government implements the integrated budget and expenditure systems (IBEX), and the Integrated Financial Management and Information System (IMFIS) among other things. The latter two are designed to create transparent and digitized financial management across the public sectors. IFMIS remained controversial since its introduction and in recent times some officials have been implicated in connection to the procurement process of management information system.

Both Admasu Nebebe and Lelaalem Yohannes, state ministers with MoFEC, said that a new strategy that consolidates the entire public finance management system will be implemented soon. Jonsie Gedefa, director general of the public procurement and property administration agency, on his part, said that project to install electronic based government procurement system (e-GP) is currently underway and that it will be implemented across the federal and regional public entities soon. Currently, the USD 2.8 million worth e-GP is piloted in four regional states and with seven federal institutions.