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HomeEthiopian NewsEthiopia Defaults: Third African Country Facing Debt Crisis

Ethiopia Defaults: Third African Country Facing Debt Crisis

Ahmed Shide, Ethiopia’s Minister for Finance, this week said that Ethiopia is not making the payment because there are contesting practices that needs to be fixed (Photo : ENA/file)

borkena 

Prime Minister Abiy Ahmed’s government has been portraying itself as one working to ensure Ethiopia’s prosperity. However, today marked a historic moment as it became the first Ethiopian government to let the country be downgraded to “defaults” after failing to make a payment to its creditors even after the end of its “grace period.”

According to a Reuters report, the payment was due on December 11, but Ethiopia was granted a 14-day “grace period,” which ended this Tuesday.

Negotiations with the creditors, the details of which were unspecified, had been ongoing but eventually broke down.

S&P Global Credit Rating Agency downgraded Ethiopia’s rating to “default” on December 15 due to the country’s failure to make the payment on December 11. 

The amount Ethiopia failed to pay in interest charges, described by Reuters as “Coupon” Payment, is $33 million. Ethiopia now officially joins Ghana and Zambia as the third country on the continent to default.

This comes amidst claims by the Ethiopian government that it raised $24 billion in foreign currency revenue in the last fiscal year, a figure it claims to be higher than before.

Earlier this week, Ahmed Shide, the Minister for Finance, had an interview with journalists in the capital Addis Ababa. He stated that Ethiopia is not currently making the payment not because it is unable to afford the amount but because the government is contesting some practices related to debt payment.

The government has been engaged in negotiations with the IMF and World Bank for several months now, although the outcome remains unknown. With unprecedented inflation and a skyrocketing cost of living that has become unbearable for millions, there have been fears that Abiy Ahmed’s administration, under pressure from the IMF, might further devalue the Ethiopian Birr. However, in an interview with the Ethiopian State Media, EBC, National Bank of Ethiopia Governor Mamo Mihretu stated that the Ethiopian currency will not be devalued further at this point.

The Federal government has faced criticism for spending foreign currency on purchasing drones for the war in the Amhara region of Ethiopia. It has been six months since the government declared a state of emergency in the region. The conflict has severely impacted economic activity in the region to the extent that the regional government was only able to collect one-third of the planned tax in the first quarter of Ethiopia’s current fiscal year.
Analysts saw Ethiopia’s debt crisis coming. 

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6 COMMENTS

  1. Here you are. We, not directly involved with the talks about the payment, don’t know the details about it. We have no clue about what is going on behind the close doors between the lenders and indebted. This official, H.E. Ahmed Shide is an over qualified financial expert and is said to be surrounded by equally qualified experts. And it is not only Ethiopia but Ghana is also not budging to the terms and practices of the payment. They will make some rearrangements and we will never hear about it anymore.

    Ok bigots! Stop dancing to this tune!!! Keep your composure! Will you?

  2. Many economists and sensible people were anticipation this bad news soon for two main reasons or causes. First, the ruling TPLF -EPRDF that ruled the nation with iron-fist over 28 years was borrowing and then spending the money like drunken sailers for themselves and then cooking the books while talking of forward leap economics , developmental sucess nonsense and and bla,..bla. Secondly, then came the PP-Oromomma, which is nothing short of second phase of EPRDF political entity but with less competency/clumsy lead by Abiy . He envisioned some weird vodoo econmics and midnight Gospel mirackes , on top of instigating inferno on earth and devastating i coflic within. There you have a perfect storm of economic collapse, malfeance ,and carrying dubious distiction title of defaulted nation.

    • Plainview,

      Out of all comments here, i picked you for being the most idiot, don’t worry you are not the only one. Sorry for being truthful here. Do you understand what you wrote? did Ethiopia collapsed economically. Do you think 33 Million dollar is a big deal for a country who collected 24 Billion Dollar just in 2023 unless there is back and forth with the creditor as mentioned by the Finance Minister? Do you know USA the father of Dollar itself downgraded in 2023 to AA from AAA credit rating? what is credit rating? How and why, it happens? Is it the end of the world?

      Proud supporter of Dr Abiy’s leadership and their decisions in so many areas, for me each day i see Ethiopia going up a few steps regardless of all these complainers with retarded thoughts and civilian death in different parts of the country due to childish politicians who wants to play with fire while holding a stick and ended up hurting their own society.

      sit back and enjoy this great leadership who is committed to unlock all these clogged brain across our land. Ignorance has affected my country so much; we fight local with a leader who is trying his best to fix the past 100 plus years while focusing on the future.

      Suggestion:

      Be honest please

  3. No substance to the report above. Another of Borkena, Inc skewering Abiy and his Admin. Borkena referred us to “Analysts saw Ethiopia’s debt crisis coming” written by another Amhara “scholar”. The report ended with, “The Federal government has faced criticism for spending foreign currency on purchasing drones for the war in the Amhara region…” Another silly connection.

    First, the WB/IMF (the West) will NOT want to see another mess in the Horn of Africa. Second, all talk about “defaulting” and “grace period” is WB/IMF scheme to demand conditions favorable for Big Business in the West. I think Ethiopia is on the right track in the way it is handling the transition.

  4. Overqualified enough to dig bigger holes and send the country into debts and bankruptcy multiple future generations can’t get out of. It is not bigotry when people ask for a responsible and accountable government especially one that imprisons, bombs , murders and silences its citizens which is part of the reason for failure. Money is being redirected to destroying one’s country just to keep a single person or party in power and gamble the future of a nation.

  5. I suspect the one billion dollar Euro bond contracted during the Premiership of Hailemariam Dessalegn, on order by the real power from behind named TPLF, was squandered and/or embezzled without any accountability.
    Once the proceeds from sale of the bond were released, their use was entirely at the discretion of TPLF with no question asked by the bond holders.

    If instead the equivalent amount originated as loans and/grants from official bilateral or multilateral agencies, TPLF would not have had the freedom to use the money without accounting to anyone since the expenditures would have required tbe documentation and pre-approved by the bilateral and multilateral. TPLF did not want that, and so it issued the Euro bond instead. It was then freely able to use the funds any way it wanted, perhaps to buy arms and part of it to be pocketed by individual members of the party.

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