Bloomberg | First there was a war, now Ethiopia faces a debt crisis.
The nation’s request to restructure its external debt under a Group-of-20 program highlights how much circumstances have changed for the country and Prime Minister Abiy Ahmed in just over a year.
In 2019, Abiy won the Nobel Peace Prize for ending two decades of conflict with Eritrea. After coming to power in 2018, he was hailed for pledging to open up the economy and create more space for democratic expression.
The coronavirus outbreak and a war with the rebellious Tigray region, have stifled that. Little progress has been made on privatization, and civilian casualties and displacement in Tigray has seen the leader of one of Africa’s fastest growing economies condemned internationally.
Now the country is worried about meeting its debt obligations and its announcement that it’s discussing liabilities with official lenders has sparked panic among private creditors. The country’s Eurobonds plunged the most on record last week.
“The World Bank has stepped in to fill the gap” in the past, said Mark Bohlund, a senior credit research analyst at REDD Intelligence. That’s “become more politically challenging in the wake of alleged human-rights abuses committed during the war in Tigray,” he said.
For now, there isn’t an immediate way out for Abiy.
The coronavirus has slashed demand for the country’s horticulture and textile exports and tourism has ground to a halt.
The war, which threatens to drag on in the form of guerrilla resistance, hasn’t helped.