The intricacy of Ethiopia’s debt management


In the first quarter of the budget year Ethiopia did not service USD 72.65 million under Debt Service Suspension Initiative (DSSI), while from July 1 to September 30, 2020 the country serviced USD 483 million for external loan that it received previously.
The country’s total outstanding debt took more than half of the country gross domestic product (GDP).
The quarterly public sector debt statistical bulletin published by Debt Management Directorate of Ministry of Finance (MoF) indicated that in the first quarter of the 2020/21 budget year the country had serviced USD 483.26 for external loan.
However, due to the COVID 19 pandemic that imposed massive social and economic challenges globally, the country has benefited to extend the service of USD 72.56 million under DSSI agreement that the G20 countries agreed to support eligible countries.
Due to the pandemic effect on poorer countries it was recalled that the World Bank and the International Monetary Fund urged G20 countries to establish the DSSI that is helping countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people.
Since it took effect on May 1, 2020, the initiative has delivered about USD 5 billion in relief to more than 40 eligible countries. The suspension period, originally set to end on December 31, 2020, has been extended through June 2021.
MoF quarterly report stated that during the quarter as an eligible country of DSSI initiative, has suspended the external debt service payment of central government to its bilateral creditors amounted to USD 72.65 million, out of which USD 47.78 million was principal payment and the remaining USD 24.87 million was interest payment.
“The country is one of the eligible countries for the G20 DSSI, and has signed MOU with Paris Club countries on the DSSI related to the Paris Club countries; currently we are not making any external debt service payment for our bilateral creditors of central governments as per the G20 DSSI. DSSI agreement had been signed with the government of France on debt service suspension amounting to EUR 3.7 million (Debt Service payment suspension for the period May 1, 2020 – December 31, 2020),” it said.
Under DSSI Ethiopia, which described by the World Bank as high risk external debt distress country, has benefited service extension for a total of USD 472.9 million or 0.5 percent of the GDP that it borrowed from central governments.
According to the quarterly bulletin, the country debt from bilateral creditors as of September 30, 2020 has stood at USD 8.44 billion, which is 29.1 percent of the total external debt. From the stated amount the Paris Club countries share is USD 838 million and the balance USD 7.6 billion is from non-Paris Club sources.
On the other hand during the stated period that the total external public sector debt USD 483.26 million the country settled the USD 41.05 million is made by central government while the remaining USD 442.21 Million was made by state owned enterprises (SOE’s).
From the service made by SOE’s USD 274.67 million was settled by owed on government guarantee and the balance USD 167.53 million repaid by borrowers that do not have government guarantee.
The SOEs that do not have government guarantee are mainly Ethiopian Airlines and Ethio Telecom.
Government guaranteed outstanding external debt as of September 30 stood at USD 7.06 billion, while non-government guaranteed debt is USD 3.48 billion.
Both government guaranteed and non-government guaranteed outstanding external debt have dropped by USD 183.4 million and USD 129 million respectively compared with the figure as of June 30, 2020.
Meanwhile there was no new external loan agreement signed during the quarter, a total of external public debt disbursement during the first three months of 2020/21 budget year was USD 215.62 million.
According to the MoF quarter bulletin, the total public sector debt stock as at September 30, 2020 stood at USD 54.71 billion.
Compared to the last year the same period, revised June 30, 2020, debt stock which was USD 55.06 billion it has shrunken in terms of USD.
“Domestic debt in terms of USD declined as a result of a relatively higher rate of depreciation of birr against USD, while in terms of birr the total domestic debt increases compared to June 30, 2020,” the bulletin explained.
Out of which total public external debt is USD 28.99 billion and total public domestic debt amounted to USD 25.71 billion.
From the total Public sector debt outstanding that included external and domestic USD 30.6 billion, which is about 56 percent is owned by central government and the balance USD 24.1 billion (44 percent) is owed by SOE’s.
From the external debt 64 percent is owned by central government while the remaining 36 percent is by SOE’s. Out the total public domestic debt the share of central government is about 47 percent while the remaining 53 percent is that of SOE’s.
The total external outstanding debt that is USD 28.99 billion is 26.93 percent of the GDP, while the total public debt is 50.8 percent of the GDP.