Ethiopia’s total public debt, encompassing both external and domestic obligations, surged 25.3% over five years to reach $68.9 billion by June 2024, according to the Ministry of Finance’s latest report.
The debt now equals 32.9% of the country’s gross domestic product (GDP), an 8.8% increase from the previous year. Exchange rate fluctuations were cited as a primary factor behind the rise in debt denominated in U.S. dollars during the 2019-2024 period.
Domestic debt makes up 59% of the total at $40 billion, while external debt accounts for 41%, or $28.9 billion. Over the past year, domestic debt rose by 14%, while external debt grew at a slower pace of 2.5%, reflecting limited new external loans and repayments of existing obligations.
Multilateral creditors, providing concessional loans, hold 52% of Ethiopia’s external debt, with bilateral lenders accounting for 28.3% and the remainder owed to private entities. The U.S. dollar represents the bulk of Ethiopia’s external debt currency composition at 45.8%, followed by the euro at 6.6% and the Chinese yuan at 1.5%.
Ethiopia’s external debt-to-exports ratio stands at 179.8%, exceeding the country’s 150% threshold, according to the report. However, the total public debt remains below the World Bank and International Monetary Fund (IMF) benchmark of 35% of GDP in present value terms.
These findings come after Ethiopia and the IMF concluded talks on a new program to support the second phase of the Homegrown Economic Reform plan. In July 2024, the Ethiopian government adopted a market-based foreign currency regime, replacing the crawling peg system.
The government secured a $1.4 billion debt service standstill from the Paris Club’s Official Creditor Committee, alongside $3.5 billion in anticipated debt relief under the G20 Common Framework. Combined, the measures are expected to provide $4.9 billion in relief, facilitating Ethiopia’s reform implementation.
Ethiopia projects a $10.7 billion financing gap for the 2024-2028 program period. The IMF is expected to contribute $3.4 billion, with $3.75 billion from World Bank budget support. Debt relief under the Common Framework is anticipated to address the remaining $3.5 billion shortfall.
Last week, the IMF announced the completion of the second review of Ethiopia’s $3.4 billion Extended Credit Facility (ECF), enabling a $248 million disbursement. Total disbursements under the program now stand at $1.611 billion.
The IMF praised Ethiopia’s progress in debt restructuring and its efforts to secure a debt treatment under the G20 Common Framework, which is expected to culminate in a memorandum of understanding with official creditors ahead of the program’s third review.
