KEY POINTS
- War in Tigray and COVID-19 strained Ethiopia’s finances.
- Ethiopia secures debt suspension from China amid IMF talks.
- Central bank floats birr as IMF approves $3.4 billion program
Below is a timeline of key events as Ethiopia advances efforts on its long-delayed debt restructuring:
War and pandemic spark debt troubles for Ethiopia
November 2020: War begins in Tigray between regional forces and the federal military, straining finances already impacted by the COVID-19 pandemic.
Mid-2020: The disruptions from the war and COVID-19 led to the collapse of a $2.9 billion IMF program, originally agreed upon in December 2019. The IMF staff conducts a review, but the board never finalizes it, and both sides abandon the program.
January 2021: Ethiopia announces it will seek sovereign debt restructuring under the G20’s Common Framework for debt relief for developing economies. Ethiopia becomes the second country to pursue this, following Chad. Zambia and Ghana later joined, Reuters reported.
June 2022: Ethiopia resumes talks with the IMF.
October 2022: The government bans the import of dozens of products, including cars, liquor, and household goods, citing acute foreign currency shortages. Business owners report a thriving black market for U.S. dollars.
March/April 2023: An IMF team visits Ethiopia for discussions with authorities.
IMF and China Engage in Debt Talks with Addis Ababa
August 2023: Ethiopia secures a debt servicing suspension from China, one of its key creditors.
September/October 2023: Another IMF team visits Addis Ababa for talks with Ethiopian authorities.
November 2023: Ethiopia reaches an agreement in principle with its official creditors on an interim debt service suspension.
December 2023: Ethiopia defaults on its $1 billion Eurobond after missing a $33 million coupon payment, leading to a drop in the sovereign bond price. Rating agencies cut Ethiopia’s credit rating to reflect the default.
July 29, 2024: Ethiopia’s central bank floats the birr, meeting a key IMF requirement for new financing. The currency sharply drops against the dollar. Hours later, the IMF approved a four-year, $3.4 billion program, facilitating Ethiopia’s debt restructuring.
