Ethiopia must secure an International Monetary Fund (IMF) loan by March 31, 2024, as mandated by the Paris Club of developed creditor nations. Failure to meet this deadline could nullify Ethiopia’s agreement with bilateral creditors (excluding China) to suspend debt payments until 2025. The debt service standstill, covering 2023 and 2024 for loans agreed upon before November 10, aims to save Ethiopia approximately $1.5 billion.
The Paris Club emphasized that the success of the debt payment suspension hinges on Ethiopia finalizing an agreement with the IMF. Ethiopia’s economy is facing challenges, including double-digit inflation and foreign currency shortages, heightened by the aftermath of a two-year civil war in the Tigray region.
The deal, announced on November 23, outlines a suspension of payments until 2026, followed by a repayment period from 2027 to 2029. However, the Paris Club made it clear that this arrangement is contingent on Ethiopia reaching an agreement with the IMF.
This development is part of broader debt restructuring discussions, providing temporary liquidity relief. If Ethiopia fails to secure an IMF staff-level agreement by the specified deadline, the Paris Club reserves the right to declare the suspension null and void.
The interconnectedness of the debt standstill and the broader restructuring process is highlighted, including Ethiopia’s intention to restructure a $1 billion international bond maturing in December. Investors in the 2024 bond are closely monitoring a December 11 coupon payment, while the Paris Club’s consideration of the debt standstill in overall restructuring introduces potential complexities involving private creditors.
The Paris Club revealed that 10 of its members, including co-chairs France and China, are part of Ethiopia’s official creditor committee. Other committee members include India, Kuwait, Poland, Saudi Arabia, and Turkey. The International Monetary Fund, a crucial player in this unfolding scenario, has not yet commented on recent developments.