Restructuring the debt of Ethiopia

Paris Club creditors agreed on April 5, 2001 with the Government of Ethiopia to a restructuring of its public external debt, following the approval of a Poverty Reduction and Growth Facility with the International Monetary Fund on March 19, 2001.

This agreement consolidates roughly US$ 430 million, of which 33% of ODA loans. This amount consists of US$ 230 million of arrears in principal and interest as at February 28, 2001 and US$ 200 million of maturities in principal and interest falling due from March 1st, 2001 up to March 31, 2004.

The agreement is concluded under the so-called "Naples terms" : pre cut-off-date ODA credits are to be repaid over 40 years, with 16 years of grace, at interest rates at least as favourable as the original concessional rates applying to those loans ; 67% of pre cut-off-date commercial credits are cancelled, taking into account previous cancellations undertaken by Paris Club creditors ; the remaining amounts are rescheduled over 23 years, with 6 years of grace, at market rates of interest.

This debt relief will lead to the immediate cancellation by Paris Club creditors of about US$ 140 million of Ethiopia's external debt. These measures are expected to reduce debt service due to Paris Club creditors between March 1st, 2001 and March 31, 2004 from around US$ 500 million down to around US$ 110 million. The remaining payments consist of interests on the rescheduled amounts as well as debt service due on post cut-off-date debt and short term debt.

Ethiopia is a country eligible to the enhanced HIPC Initiative. The creditor countries expressed their readiness to consider the debt service of Ethiopia, at the end of this agreement