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Ethiopia Receives $1.5 Billion Debt Reduction Ahead of Wider Debt Talks

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Flag of Ethiopia - Sputnik Africa, 1920, 30.11.2023
Ethiopia has been fighting high inflation and low foreign currency reserves, while also dealing with the devastating aftermath of the conflict in the northern part of the country.
Ethiopia has entered into an agreement with creditors to write off debt worth $1.5 billion, the head of the country's central bank said on Wednesday.
The news was announced by National Bank of Ethiopia Governor Mamo Mihretu and confirmed in a statement from the Paris Club of creditor countries on Thursday, which "strongly welcomed this important achievement."

"We've been able to achieve an interim debt service suspension and therefore able to save around $1.5 billion that would have gone to debt servicing," Mamo was quoted as saying at a press conference.

The move reportedly eases Ethiopia's financial load as it seeks a wider funding scheme, the Paris club stressed.

"This debt standstill from Ethiopia’s official bilateral creditors will provide time-limited liquidity relief ahead of discussions on a wider debt treatment," the organization said in a statement.

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Ethiopia's finances have been negatively impacted by the two-year conflict in the northern region of Tigray that ended with a peace agreement in November 2022.
In March, Ahmed Shide, the country's minister of finance, said that at least $20 billion is needed over the next five years to rebuild the conflict-torn part of the country, the local media reported.
Ethiopia reportedly has an external debt of about $28 billion, while battling extreme inflation and lack of foreign currency reserves. A total of $14 billion was reportedly loaned by China.
In February, during the 36th African Union Summit, UN Secretary-General Antonio Guterres said that debt-ridden African countries were being forced into unfair deals by an international financial system that denied them debt relief and charged "extortionate" interest rates.
Ethiopian Prime Minister Abiy Ahmed supported the Secretary General's statement, saying that all states on the continent want to put their economies "back on a growth trajectory." However, he also said that this would be challenging without restructuring aimed at ensuring a sustainable level of external debt.