Ethiopian Prime Minister Abiy Ahmed said his government has done a successful job in reducing the country’s debt burden and extending the repayment period of 60% of the loans secured from financiers.
The premier’s remark came following reports that Ethiopia’s external and domestic debt is estimated to be US $50 billion, or 1.4 trillion Ethiopian Birr.
Addressing the national parliament on Friday February 1, the premier said the country’s economic outlook is healthy, and that Ethiopia needs to improve its economy by modernizing the agro industry sector and expanding irrigation in particular.
Responding to the country’s record level of high debt, minister of finance and International co-operation, Ahmed Shide, said most of the loans were spent on infrastructure development, mega -projects and commerce.
In the next nine months alone, the country is expected to repay US $1.2 billion, and the amount to be paid in the next two years is $6 billion.
An extension of the repayment period would help to finalize delayed projects and ensure the sustainability of development, Abiy told the MPs.
According to the premier, the World Bank has injected $1.7 billion in a direct loan in a bid to narrow the trade deficit, which currently stands at 500%.
He said the government is working to prevent high inflation, which combined with the unemployment rate, could result in stagflation followed by recession or an economic depression.
The bulk of Ethiopia’s loan is from a number of multilateral institutions, primarily the World Bank. It is estimated to be $US 7.8 billion. The Africa Development Bank and China have also granted huge sums in loans to Ethiopia.
The World Bank has forecast Ethiopia’s economy to grow between 8.8 - 9% this year as inflation declined to 10.3% from 14% in the previous year.
Ethiopian economists have identified five ways to tackle the country’s debt problem. The first option is to increase export earning, which they say is a long term but lasting, solution, but which needs the restructuring of the economy. Avoiding short- term loans, and spending on projects that are likely to be unfeasible, re-negotiating debt payback time and mobilizing the Ethiopians in the diaspora to increase their remittances These are the solutions identified and suggested by Ethiopian economists to tackle the country’s economic problems.
The cost of the Grand Ethiopian Renaissance Dam (GERD), Africa’s biggest dam, has shown a 60% cost overrun, due to delays with the project, said the prime minister, adding that two turbines of the dam will begin generating power in 2021.