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Ethiopia - Joint World Bank-IMF Debt Sustainability Analysis (English)

Ethiopia’s public and publicly guaranteed debt is deemed sustainable, but downside risks and liquidity pressures have increased due to high uncertainty surrounding the intensity and duration of the COVID-19 outbreak and its implications for the economic outlook. Ethiopia’s debt vulnerabilities stem from rising debt servicing needs, an overvalued exchange rate, and a small export base. The authorities have taken steps to reduce vulnerability by controlling external borrowing, debt service reprofiling, and committing to move toward market-based exchange rate and FX market liberalization, both of which should improve FX availability and boost private sector activity and exports. Under the baseline, two external debt indicators breach their thresholds. As a result, Ethiopia continues to be assessed at ‘high’ risk of debt distress. The authorities have committed to undertaking additional reprofiling by the first review under the ECF-EFF arrangements to reduce external debt servicing needs relative to exports, with an aim of achieving a ‘moderate’ risk of external debt distress rating. However, against the backdrop of the pandemic, the capacity to absorb shocks has declined indicating liquidity pressures. As such, a larger or more persistent impact of the COVID-19 shock than presently assumed could threaten debt sustainability. Steadfast implementation of FX reforms would reduce these pressures over the medium term and safeguard Ethiopia's capacity to repay the Fund. Monitoring of contingent liabilities, the main vulnerability of overall public debt, and continued improvement in debt management and reporting are recommended.




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Ethiopia - Joint World Bank-IMF Debt Sustainability Analysis (English). Washington, D.C. : World Bank Group.