IMF Backs Ethiopia’s Plan to Rework Debt Under G-20 Framework

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The International Monetary Fund backed Ethiopia’s plan to rework its debt under the Group of 20 common framework as it reached a staff-level agreement with the government on credit facilities.

“To strengthen debt sustainability, the authorities aim to lower the risk of debt distress rating to moderate by re-profiling debt service obligations,” the lender said in an emailed statement on Tuesday. “In this context, the fund welcomes Ethiopia’s request for debt treatment under the G20 Common Framework.”

Ethiopia announced plans last month to rework its liabilities under the G-20 program that seeks to include private creditors into an agreement on debt relief for countries that need it following the fallout from the coronavirus pandemic. The nation’s Eurobonds plunged the most on record following the revelation, and then partly recovered after the government said it would only approach private creditors as a last resort.

Ethiopia Eurobonds Plunge as Nation Seeks G-20 Debt Review

The IMF reached a staff-level agreement with Ethiopia on policy measures for the completion of the first and second reviews under the Extended Credit Facility and Extended Fund Facility arrangements, according to the statement.

“Risks to the economic outlook are tilted to the downside,” the IMF said, projecting economic growth of 2% in 2020-21 and 8.7% in the following fiscal year.

Several economic and political uncertainties have hit the Horn of Africa nation from the pandemic to war in the northern Tigray region and a desert locust invasion.

“A modest fiscal expansion is envisaged this fiscal year to accommodate the humanitarian assistance and reconstruction needs,” Sonali Jain-Chandra. who led the IMF staff team, said in the statement. “At the same time, the authorities are now moving to enhance domestic revenue mobilization.”

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