By Jorgelina do Rosario and Rachel Savage
WASHINGTON/JOHANNESBURG (Reuters) – Delays in restructuring Ethiopia’s debt due to the failings of a new global mechanism for resolving debt problems are “disappointing,” the east African nation’s state finance minister said on Saturday, adding that he planned to raise it with the head of the IMF later in the day.
Africa’s second-most populous country requested a debt restructuring under the Group of 20’s Common Framework process in early 2021, but progress has been complicated by a civil war that broke out in November 2020 and has delayed progress with creditors on a debt workout.
Ethopia’s state finance minister Eyob Tekalign Tolina acknowledged the war was a key factor in the delay as well, and said he hoped there would be peace talks in “the coming few weeks” in an interview with Reuters on the sidelines of the International Monetary Fund-World Bank annual meetings in Washington.
The conflict pits Ethiopia’s federal government against regional forces led by a party that used to dominate national politics. Thousands of civilians have been killed and millions uprooted by the violence.
“It’s completely disappointing that it has stuck,” Eyob said of the Common Framework. “We trusted the fund and we trusted G20 countries.”
Ethiopia’s bilateral creditors co-chaired by France and the largest creditor China – which Eyob said was represented by China Eximbank – recommitted to granting debt relief in August, but further progress requires an IMF deal.
France and China have “done a commendable job in navigating through this difficult journey,” said Eyob.
He said Ethiopia was requesting “exceptional access” to IMF funding of more than 100% of its allowance, but declined to say how much exactly.
“I think the (IMF) board would see that the government has done everything in its power to resolve this conflict peacefully,” he said. “As you know, we have been calling for the AU process, the AU-led peace talks, which is advancing now.”
Peace talks that would have been the first formal negotiations between the two sides were scheduled last weekend, but delayed due to logistical reasons, diplomatic sources said.
“Ethiopia does not have a solvency issue, it’s more of a short-term liquidity issue,” Eyob said, adding that there was no danger of it defaulting on its debts.
He declined to specify how much debt relief the country requires, saying that the IMF still needs to finish a Debt Sustainability Analysis, which forms the basis of debt restructurings.
Eyob said he expected the DSA to be finalised in November.
The IMF did not immediately respond to a request for comment.
Ethiopia’s government plans to finish working out how its banking sector will be liberalised this year, Eyob said, adding that about a dozen European and African banks had expressed interest.
GDP growth was “over 6%” in the year to July 2022, he said, and the forecast is 9.2% for 2023, Eyob said.
The east African country has long experienced foreign exchange shortages, with the IMF forecasting its reserves to fall from 1.5 months of import cover in 2021 to 0.7 this year.
The birr was this week trading at 90 to $1 on the black market, compared to 53 in banks.
“We’ve made it very clear, we want to reform our forex regime,” Eyob said. “So the exchange rate unification remains one important policy goal, but we are just doing it gradually.”