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Debt Management in Ethiopia


<p>Good debt management is part of a good economic management. Effective debt management will help us ensure past errors committed due to imprudent borrowing policies are not repeated. On the other hand, the impact of debt burden is enormous in economic and human development. The debt overhang has continued to have a devastating effect on macroeconomic stability and the credit worthiness of the country stunting growth, trade and development and exerting a huge pressure on public expenditures critical to the social sector development. Thus, the importance of effective debt management has assumed centre stage for Ethiopia in its effort to restore stability and credit confidence in its economy. Under the HIP category that Ethiopia is, fewer solution measures were pursued by the government to alleviate the serious debt burden, which includes debt buy-back operation, rescheduling some of the debt stock and debt service obligations and debt forgiveness. Apart from discusssing the steps taken, since the introduction of the reform program in 1992, in line with the reduction of the external debt burden to complement the debt strategy of the country, new developments in debt reduction schemes including prospects towards the HIP (highly indebted poor countries) initiative will be examined and evaluate. Moreover, an overview of the mounting domestic debt is another potential burden viz a viz the total debt portfolio of the country that deserves no less treatment. Ethiopia, with an estimated total population of 62 million, is one of the largest and most populous countries in subbing Saharan Africa. The low gross domestic product per capita of USD 100 is the manifestation of the widespread poverty in the country. The very low level of development and widespread poverty is largely attributed to many factors, and they are not recent phenomena, they have rather been there for long and their cumulative impact resulted in the current situation of poverty. Therefore, the debt relief gained from the HIP imitative helps to redirect financial resources, presently used to service external debt to finance a poverty reduction program in order to create a productive investment atmosphere in the country. Notwithstanding the overall change and evolution exhibited in the composition and structure of the debt portfolio of the country following the three round rescheduling process with the paris club creditor countries, coupled up with the magnificent debt reduction from the former USSR (80% up front discount), examination of the overall practice of Ethiopia&#39;s debt management reveals that no significant change was made as far as the country&#39;s debt sustainability is consumed. The need for an effective debt management along with the overall macroeconomic management is on the high side. To that end, due emphasis needs to be given in areas of policy procedures, automation, capacity building as well as reporting and disbursement in order that an effective debt management be put to place</p>

Corporate Author: 
Gebrehiwot Ageba, Jemal Mohammed and Solomon Tesfay (Editors) , Ethiopian Economic Association(EEA) , Department of Economics of AAU & Fredrich Ebert Stifung
Ethiopian Economic Association (EEA)
Primary Descriptors: 

<p>Debt, Management; external Debt</p>

Secondary Descriptor: 

<p>Economic management - Good debt</p>

Geographic Descriptors: 
Cataloge Date: 
Broad Subject heading: 
Call Number: 
338.963 PRO 2002
Serial Key Title: 
Proceedings of the Eleventh Annual conference on the Ethiopian economy
Publication catagory: 
Content type: 
Publication date: 
2013-12-27 00:00:00
Forum or Discussion date: 
2013-02-27 00:00:00
Conference Place: 
Nov. 2-4, 2001, Nazareth, Ethiopia
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Current frequency: 
Thematic area: 
Policy Reform, Implementation and outcome in Ethiopia