With Kenya struggling to honour international obligations as loan repayments exceed revenue collections, Ethiopia on Thursday received a reprieve from global financial institutions following a 2-year debt service suspension.
According to a statement from the Paris Club, an informal group of official creditors, the Ethiopian government and its creditors agreed on a time-bound suspension of debt service due from January 1, 2023, to December 31, 2024.
Some of Ethiopia’s creditors include the International Monetary Fund and the Chinese government.
Ethiopia’s debt relief was announced at a time when Kenya is struggling to pay Ksh306 billion Eurobond maturing in June 2024.
President William Ruto meeting with representatives of IMF at State House on November 13, 2023.
“Complementary to the bilateral agreement between China and Ethiopia, an agreement between the other official bilateral creditors and Ethiopia was coordinated through the official creditor committee (OCC) of Ethiopia under the Common Framework, which is co-chaired by France and China,” the statement from Paris Club read in part.
Ethiopia had pleaded for the suspension, noting that it would provide Prime Minister Abiy Ahmed’s administration with liquidity relief.
Additionally, it was announced that the Ethiopian government and IMF were in discussion over wider debt treatment. Paris Club, however, disclosed that Ethiopia and the IMF had already agreed on the parameters of the wider debt treatment.
The Paris Club’s role is to find coordinated and sustainable solutions to the payment difficulties experienced by borrower countries. It has 22 permanent members, including the United States, the United Kingdom, Canada, France, Germany and Russia.
Non-Paris Club members of the official creditor committee are China, India, Kuwait, Poland, Saudi Arabia, and Turkey.
In 2021, the Paris Club rejected Kenya’s request for Ksh64 billion debt relief. China, who approved Ethiopia’s debt relief, were among the countries that opposed Kenya’s request for a similar wish.
The decision to award Ethiopia a similar request will raise questions in Kenya as China accounts for 64 per cent of the country’s Ksh10 trillion, according to the National Treasury.
On October 18, a day after President Xi Jinping hosted Ethiopia’s Abiy Ahmed, Ruto met the Chinese leader seeking a Ksh152 billion loan to boost various infrastructural projects.
Xi Jinping did not immediately agree to advance Kenya a new loan despite promising Abiy Ahmed an all-weather strategic partnership which included support of Ethiopia’s development projects.
President William Ruto shakes hands with his Chinese counterpart Xi Jinping on October 18, 2023