Finmin Ahmed Shide on Ethiopia’s debt restructuring process

Ethiopia's Minister of Finance, Ahmed Shide, recently spoke about the challenges faced by the country in its debt restructuring process during a panel discussion at the World Bank Group and IMF Spring Meetings. In early 2021, Ethiopia requested debt relief from creditor governments under the new G20 framework for debt restructurings. However, progress was hindered by a 21-month civil war in the northern Tigray region. Shide highlighted the slow pace of the process as a significant challenge, stating that Ethiopia's macroeconomic imbalance has been exacerbated by internal and external pressures such as drought and conflicts like the war in Ukraine. These factors have led to a deterioration in external positions and declining international reserves, making debt treatment and additional reform measures crucial to addressing the macroeconomic imbalance and moving towards a sustainable path. The Minister emphasized Ethiopia's commitment to fiscal discipline, noting that the government has refrained from non-concessional borrowing in the past five years. Shide explained that the country is working with the IMF and the World Bank on a homegrown reform program to restore macroeconomic balance. Unlike some other African nations, Ethiopia does not face external payment arrears, and its debt parameters are clearer. However, the country is set to face a significant repayment burden in the coming years, putting pressure on its economy, especially considering the slow growth in exports. Shide acknowledged that Ethiopia's challenges are both internal and external, with global shocks exacerbating the situation. The Finance Minister underscored the importance of expediency in the debt treatment process, urging for quick decisions and coordination between the IMF, World Bank, and creditor committees under the G20 framework. While acknowledging the effectiveness of the G20 common framework, Shide expressed concerns about the prolonged process and the adverse impact it had on Ethiopia, such as increased bond spreads and credit rating downgrades. He called for flexibility in the approach, emphasizing that each country's unique circumstances should be considered. Shide outlined the economic reforms undertaken by Ethiopia in the past few years, including measures to promote private sector growth, reduce fuel subsidies, and constrain central bank borrowing by the government. However, he acknowledged the need for additional financing to address the challenges posed by conflicts, natural disasters, and global economic shocks. The Minister stressed the importance of international support from institutions like the World Bank and the IMF in helping Ethiopia navigate its current economic challenges and lay the foundation for sustainable private sector development. He also highlighted the urgency of addressing the exchange rate regime, which he deemed unsustainable and distortionary to the economy. In conclusion, Minister Ahmed Shide reiterated Ethiopia's commitment to addressing its macroeconomic challenges and expressed the need for timely and tailored support from international partners to facilitate the country's economic recovery and growth.