Debt Relief: IMF, China Pause Ethiopia’s Burden as Kenya Faces Pressure with Ksh 306B Due in 6 Months
In light of Kenya’s predicament of being unable to fulfill its international commitments, because revenue collections fall short of loan repayments, global financial institutions granted Ethiopia a reprieve on Thursday after a two-year suspension of debt service.
As stated by the Paris Club, an informal consortium of official creditors, an agreement has been reached between the Ethiopian government and its creditors regarding a temporal restriction on debt service, commencing on January 1, 2023, and concluding on December 31, 2024.
The Chinese government and the International Monetary Fund are two of Ethiopia’s creditors.
The announcement of Ethiopia’s debt relief coincided with Kenya’s distress over the maturation of Ksh306 billion Eurobonds in June 2024.
“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, stating that it would provide liquidity respite to the administration of Prime Minister Abiy Ahmed.
Additionally, it was disclosed that the Ethiopian government and the IMF were deliberating on the treatment of a broader range of debt. However, it was revealed by the Paris Club that Ethiopia and the IMF had reached a consensus regarding the specifics of the broader debt treatment.
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The Paris Club is tasked with coordinating and implementing long-term solutions to the payment challenges that borrower nations face. Russia, the United States, the United Kingdom, Canada, France, and Germany are among its 22 permanent members.
Official creditor committee members from countries other than the Paris Club include Turkey, China, India, Kuwait, Poland, and Saudi Arabia.
The Paris Club denied Kenya’s appeal for Ksh64 billion in debt relief in 2021. China, which granted debt relief to Ethiopia, was one of the nations that expressed opposition to Kenya’s appeal for a comparable wish.
The decision to grant Ethiopia a comparable request will generate skepticism in Kenya, given that the National Treasury estimates that China contributes 64% of the nation’s Ksh10 trillion.
A day after President Xi Jinping hosted Ethiopia’s Abiy Ahmed on October 18, Ruto met with the Chinese leader to secure a Ksh152 billion loan to finance numerous infrastructure projects.
Xi Jinping, despite having assured Abiy Ahmed of an all-weather strategic partnership that would include support for Ethiopia’s development projects, did not promptly consent to extending Kenya a new loan.
Debt Relief: IMF, China Pause Ethiopia’s Burden as Kenya Faces Pressure with Ksh 306B Due in 6 Months