Within the next three years alone, Ethiopia is expected to pay over $7 billion towards its debt. The leaders are renegotiating debt in the west and in the east.
Ethiopia’s international and domestic debt is estimated to be US $50 billion or 1.4 trillion Ethiopian birr, according to a report by Ethiopian state media.
Government claims that most of the loans were spent on infrastructure development, development projects and Commerce.
In the next nine months alone, the country is expected to pay US $1.2 billion. Amount to be paid in the next two years is $6 billion dollars.
With its meager earning from export trade, there is a concern now if Ethiopia could catch up with its loan repayment schedule. During last fiscal year, the total earning from export, of course including export of its main export item – coffee,is only $2.8 billion.
The country’s finance minister, Ahmed Shide, told Ethiopian Broadcasting Corporation (EBC) that effort is underway to negotiate a repayment plan that aligns with Ethiopia’s debt paying capacity. The focus in that regard is to secure extended repayment time frame and a reduced installed repayment amount.
The bulk of Ethiopia’s loan is from the multilateral institutions, primarily The World Bank. It is estimated to be $US 7.8 billion. Africa Development Bank and China have also granted a huge sum of loan to Ethiopia.
According to a report by EBC, Ethiopian economists have identified five areas to tackle the country’s debt problem.
The first option is to increase export earning which they say is a long term, but lasting, solution which need restructuring the economy. Avoiding short term loans, avoiding spending on projects that are likely to be unfeasible, re-negotiating debt payback time and mobilizing the Ethiopians in the Diaspora to increase remittance are the other solution areas identified by Ethiopian economics.
Although Ethiopia has a huge population in the diaspora, earning from remittance is only about $5 billion per year which is about one-fourth of remittance earning by countries like Nigeria and Egypt. Ethiopia is believed to have more than three million people in the diaspora.
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