Ethiopia will get at least a fourth of its debt service for a year as per the deal that the Chinese and Ethiopian leaders agreed upon in the sideline meeting of Pretoria’s BRICS summit.

In his congratulation address, PM Abiy Ahmed hailed Ethiopia’s selection as one of the six countries to join BRICS and appreciated the Chinese leadership for the pledge to pause debt service for one year.

As the PM indicated, until a total debt restructure is emplaced, the Chinese President Xi Jinping has given a one-year debt service relief, which is a great outcome for Ethiopia.

Over the past one and a half decade, China has been Ethiopia’s major source of finance through concessional and commercial loans. While the repayments have started to take shape in the past few years, the government has felt the weight of allocation of huge amounts on its budget portion for external debt service.
The growing service continues to be a thorn in the flesh for the government as the debt is paid in foreign currency, to which the country is highly in short of.

Cognizant of this, Ethiopia was a pioneer at requesting for a debt treatment under the Common Framework (CF), a framework that aimed to address the problem of unsustainable debts faced by many countries in the aftermath of the Covid19 pandemic. This agreement included all members of the G20 and the Paris Club.