Ethiopia is in talks with its creditors to convert commercial loans into concessional financing, a move that could substantially reduce the nation’s debt servicing costs.
Addressing parliament recently, Prime Minister Abiy Ahmed revealed that Ethiopia’s external debt has been reduced to under $23 billion, prompting the government to suspend further commercial borrowing.
He explained that the government’s debt management strategy now prioritizes restructuring existing loans on more favorable terms. “Our focus is on converting commercial loans into concessional loans, which will ease the interest burden and improve fiscal sustainability,” Abiy said.
This initiative follows earlier macroeconomic reforms that enabled Ethiopia to restructure between $4 billion and $4.5 billion in foreign loans. The Prime Minister also confirmed that the country’s efforts are being supported by G-20 creditors.
However, he noted that Eurobond holders remain resistant, insisting on repayment under the original commercial terms due to Ethiopia’s improving export performance. In response, the government is pushing for the debts to be managed under the Common Framework Agreement, which offers more flexible repayment conditions for struggling economies.
As East Africa’s second-largest economy, Ethiopia entered debt restructuring discussions last year to address mounting repayment pressures. As of September, the country’s external debt stood at just over $23 billion, with private creditors accounting for roughly 5%, primarily tied to a $1 billion Eurobond.
