Addis Abeba — Ethiopia is advancing debt restructuring negotiations with creditor countries in an effort to secure $3.5 billion in debt relief, Minister of Finance Ahmed Shide told lawmakers on Tuesday.
Addressing the House of People's Representatives during the presentation of the 2025/26 draft federal budget, the Minister said the government is nearing an agreement but has not yet finalized or signed any deal.
"We are in the final stages of negotiation with our creditor countries. The agreement will be signed soon," Minister Ahmed is quoted by party-owned media as saying.
However, he cautioned that even with the expected restructuring, the actual payments Ethiopia will make on its external debt "will increase", as the country prepares to resume repayments starting next year under revised terms.
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Ethiopia is restructuring $12.4 billion in external debt under the G20's Common Framework, having joined the process in 2021. The restructuring became more urgent following the country's default on its sole $1 billion Eurobond in December 2023.
In January this year, the IMF Executive Board met to assess Ethiopia's progress under its $3.4 billion Extended Credit Facility (ECF). While the IMF stopped short of confirming an agreement in principle on debt restructuring at the time, it acknowledged that "key milestones" had been achieved under the Common Framework and approved a second disbursement of $250 million. The IMF praised Ethiopia's reform drive, including foreign exchange liberalization, and noted easing pressure on parallel market exchange rates.
By March 2025, Ethiopia's Ministry of Finance announced that an agreement in principle had been reached with official creditors to restructure $8.4 billion of the country's $12.4 billion external debt. The restructuring was expected to improve the country's bargaining position with private creditors, including bondholders.
In April 2025, Reuters reported that the official creditor committee, co-chaired by China and France, was close to finalizing a deal that would give Ethiopia more time to repay its debt without Ethiopia's proposed 18% haircut, which was rejected by bondholders.
If concluded, the anticipated $3.5 billion debt relief marks a turning point in Ethiopia's macroeconomic reform program, which began in July 2024. Under this plan, the government shifted from a crawling peg exchange rate system to a market-driven regime, helping unlock over $10.7 billion in promised external financing from the IMF, World Bank, and other partners.
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While the immediate debt relief offers fiscal breathing space, Minister Ahmed Shide pledged that Ethiopia's repayment obligations will resume under the extended terms.
