The World Bank and International Monetary Fund (IMF) have warned that Ethiopia’s external debt has reached unsustainable levels, urging urgent restructuring and reforms to avert a worsening financial crisis.
In a joint assessment, the lenders cited repeated breaches of export-related debt indicators and mounting short- and medium-term repayment obligations that the country is struggling to meet. Ethiopia recently defaulted on a $33 million Eurobond coupon payment, pushing it further into official debt distress.
The report noted that the government’s liquidity and solvency remain under severe pressure, with debt obligations exceeding both export earnings and fiscal revenues.
In March 2025, Ethiopia reached an agreement in principle with official creditors under the G20 Common Framework, with a Memorandum of Understanding on debt treatment expected soon. If implemented, the deal could narrow financing gaps and reduce debt distress risks to moderate levels by the end of the IMF programme in 2027/28.
However, the IMF and World Bank cautioned that restructuring alone may not be enough, pointing to Ethiopia’s vulnerability to export shocks, currency depreciation, and ongoing political instability. Armed conflicts in Amhara and Oromia, along with governance failures and diversion of resources to non-essential projects, have further eroded economic resilience.
The institutions stressed that without comprehensive reforms, Ethiopia risks sliding deeper into crisis, with long-term consequences for growth and stability in the Horn of Africa.
