The country’s external debt is continuing to lower in the second quarter of the fiscal year, similar to the first quarter. During the last two quarters, the net external debt resource flow recorded negatives.
According to the public sector debt statistical bulletin published by the Debt Management Directorate (DMD) at the Ministry of Finance, the strength of the dollar and out-performing of principal settlement against fresh disbursement are the reasons for the reduction of the country’s debt stock for the second quarter that ended in December 31, 2021.
It indicated that during the last two quarters, only three loan agreements have been signed with partners, one for a central government project and the other two for Ethiopian Airlines aircraft purchase, totaling USD 290.74 million.
The majority amount of the loan agreement was being borrowed by Ethiopian Airlines, which is USD 279.52 million, and the remaining USD 11.22 million by the central government.
As of December 31, 2021, the total public sector debt stock that included domestic debt was about USD 56.15 billion, compared to USD 55.6 billion as of June 30, 2021.
External debt makes up around 51.5 percent of overall government debt, with domestic debt accounting for the remaining 48.5 percent.
The central government owes almost USD 34.9 billion (62 percent) of the total public sector debt outstanding that includes domestic debt, while state owned enterprises (SOEs) owe close to USD 21.3 billion.
The DMD quarterly review bulletin stated that over the past year, the central government’s portion of total public debt stock has climbed by 5 percent, while SOEs’ share has declined by 4 percent, “this can be explained in part by zero non-concessional borrowing limit from external creditors, as well as SOE’s lower borrowing from domestic sources and less disbursement from already committed old SOEs external loans.”
As of December 31, 2021, total public sector external debt was USD 28.92 billion, compared to USD 29.49 billion as of June 30, 2021. Between the two periods, the stock of external debt has decreased.
The decrease in external total public debt is approximately USD 571.04 million, or by 2 percent, “one reason for this decrease in the stock of debt can be explained by USD exchange rate variation, which is a relatively stronger USD during December 2021 compared to June 2021, which resulted in reducing the debt stock in terms of USD, which is approximately USD 319.46 million.”
It added that another reason for the debt stock’s decline is that principal payments were higher than new disbursements, resulting in a negative net flow of USD 251.58 million.
The central government is responsible for 67 percent of the entire external debt, while SOEs with government guarantees and without government guarantees are responsible for 22 percent and 11 percent, respectively.
Over the last six months, July 1, 2021 – December 31, 2021, the total external public debt disbursement was USD 595.06 million, with about 52 percent going to central government projects from various creditors, the majority of which came from IDA, and the remaining 48 percent going to SOEs.
According to the DMD, in comparison to the previous four years, the total amount of external funding disbursed in the last one and a half years was significantly lower.
“One of the reasons for the decrease in disbursement is that SOEs have not borrowed in the last three years and are disbursing less and less for their older projects as they near completion and as a result their undisbursed balance decreases,” it added.
The total external public sector debt service (principal plus interest and charges) during the last six months was USD 1.1 billion.
Of the total debt service USD 846.63 million is principal and USD 259.8 million interests.
From the total debt service in the stated period the SOEs share took the biggest chunk by settling USD 856.53 million payments.
The DMD review indicated that during the last two quarters, the net external debt resource flows were negative, which was USD -251.58 million, implying that the amount of disbursement from external sources (inflow) is less than the total external principal payments to creditors (outflow), “and the net resource transfer, which is disbursement (inflow) minus principal payments minus interest payments, is USD -511.37 million.”
The half year debt review revealed that the Treasury bills (Tbills) has mushroomed more; while it has shown progress since the government put in place new approaches on the market.
In the stated period, net issuance of Tbills with various maturities was about 132.54 billion in the first two quarters of 2021/22 budget year, and the stock of Tbills as of December 31, 2021, was about 253.5 billion, “a 110 percent increase over the June 30, 2021 balance.”
It elaborated that in comparison to June 2021, 364-day Tbills accounted for the majority of the increase, followed by 182 days, while the participation of government and private owned commercial banks on the Tbills market showed an improvement.