External creditors are waiting for the International Monetary Fund (IMF) to conduct a debt sustainability assessment before they can move forward with restructuring Ethiopia’s debt, according to Rémi Maréchaux, the French Ambassador to Ethiopia.

As chair of the Paris Club, a group of major creditor nations, France is co-chairing an Ethiopia creditors committee with China’s Exim Bank. The committee aims to provide Ethiopia debt relief under the Common Framework initiative for heavily indebted middle-income countries.

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The initiative involves not just traditional creditors like France but also non-traditional creditors like China.

“We are co-chairing the committee with China and we stand ready to reschedule Ethiopia’s debt under an IMF agreement,” Maréchaux said.

However, before restructuring can proceed, the IMF must determine how much of Ethiopia’s debt needs to be reduced. “The creditors committee will first wait for the IMF to conduct a debt sustainability assessment,” the Ambassador noted.

Once that is complete, the committee co-chaired by France and China will work to restructure Ethiopia’s debt terms. France and China would then provide financial guarantees to enable the IMF program to be finalized.

“Debt restructuring is part of any IMF agreement, so there will be no IMF agreement without first restructuring Ethiopia’s debt,” Maréchaux said. “We are ready to move forward with the rescheduling. All the necessary preparations have been made; we are simply waiting for the IMF.”

However, senior economist Alisa Strobel of S&P Global says that both the IMF and China are contributing to delays, though for different reasons: the IMF’s policy demands, and China’s opposition to write-offs.

Per Strobel, the IMF is demanding policy changes from Ethiopia around loosening the currency regime and reining in central bank financing – issues Ethiopia is reluctant to tackle.

Strobel concurs with the French Ambassador that the IMF has slowed Ethiopia’s debt restructuring by not yet conducting a debt sustainability analysis and determining the size of needed debt relief. However, Strobel notes the key sticking point in negotiations centers on IMF demands for policy changes in Ethiopia.