Ethiopia to save $4.9 bln from debt restructuring, state minister says
Long-running debt overhaul back on track after IMF deal
To save $200 mln repayment of dollar bond in re-work
Prime minister defends adoption of new FX policy
Updates with trade ministry's comment on price hikes in paragraph 14
By Dawit Endeshaw
ADDIS ABABA, Aug 2 (Reuters) -Ethiopia will enjoy $4.9 billion in relief from debt repayments when it completes its current restructuring exercise, State Finance Minister Eyob Tekalign said on Friday.
The East African country is putting its long-delayed debt overhaul back on track after securing a new International Monetary Fund financing programme.
"We will sign and finalise with each individual (creditor) country over the course of the next few months," Eyob told Reuters, referring to the savings.
Total external debt stood at $28.38 billion in March this year, data from the finance ministry showed.
Eyob was expounding on remarks made by Prime Minister Abiy Ahmed late on Thursday to explain recent economic reforms to the public via a televised event.
Abiy said the new exercise would include savings of $200 million from the restructuring of its $1 billion Eurobond XS1151974877=TE.
Eyob said that could be accomplished through "nominal reduction" of the value of the bond as part of the debt re-work.
Abiy defended this week's switch to a market-determined foreign exchange rate, saying it aimed to close the gap between the official and black market rates and did not amount to a devaluation of the currency.
The central bank allowed the birr ETB= to float freely on Monday, fulfilling a key condition for securing financial support from the International Monetary Fund and other creditors, and for putting the nation's long-delayed debt restructuring back on track.
The birr has since then lost 31.5% against the dollar to trade at 83.94 per greenback, the country's biggest lender, Commercial Bank of Ethiopia, said on Friday, and some economic analysts and commentators have voiced concern that inflation could surge.
"Saying Ethiopia has devalued its currency is wrong," Abiy said late on Thursday in a televised briefing on the new policy.
"There were two markets. One is 100 and the other is 50. So when the gap between the two became wide, it brought many dangers. So what we said, (the two) should be unified," he said.
While lifting foreign exchange trading restrictions helped Ethiopia clinch the IMF deal and funding from other creditors including the World Bank, concern about the policy's inflationary impact on low-income households has led at least two local governments to crack down on shops raising prices.
The federal ministry of trade has closed more than 700 shops for "unjustified price hikes and hoarding" after the new exchange rate kicked in, it said in a statement on Friday.
The government and its creditors say the liberalisation will help the private sector make a bigger contribution to the economy and boost long-term growth.
Reporting by Dawit Endeshaw; Writing by George Obulutsa and Duncan Miriri; Editing by Helen Popper, Giles Elgood and Alex Richardson
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
