Ethiopia’s Economic Prospects Brighten: IMF Growth Forecast, Global Debt Restructuring Effort, and AFC Membership
IMF Raises Ethiopia’s 2023 GDP Growth Forecast Amid Global Economic Uncertainty
The International Monetary Fund (IMF) has revised Ethiopia’s 2023 GDP growth forecast from 5.3% to 6.1%, making it the only major positive growth revision among African countries. However, an economic research group, Oxford Economics Africa, expects Ethiopia’s growth to be just under 4% this year due to political instability and a liquidity crisis deterring investors.
The IMF predicts global GDP growth will slow down from 3.4% in 2022 to 2.8% this year, while Oxford Economics Africa is more concerned about tightening credit conditions and debt sustainability. These factors could lead to systemic debt distress in emerging markets and developing economies.
Debt sustainability is a significant theme in the latest World Economic Outlook report, particularly in the African context. The IMF notes that around 56% of low-income developing countries are already in debt distress or at high risk. According to the IMF, Ethiopia is expected to see the largest reduction in public debt by 2026, decreasing by 16.6 percentage points.
Global Roundtable Agrees on Streamlining Debt Restructuring Efforts
A number of African countries, including Ethiopia, are currently engaged in difficult debt restructuring talks. The Global Sovereign Debt Roundtable, which began on April 12, could have important implications for these nations amid the current economic uncertainties.
Global creditors, debtor nations, and international financial institutions agreed on ways to jumpstart and streamline debt restructuring efforts, potentially benefiting Ethiopia as one of the countries involved in the G20 Common Framework.
The Global Sovereign Debt Roundtable, organized by the World Bank, International Monetary Fund (IMF), and India, aims to accelerate debt restructuring processes and make them more efficient. Ethiopia, Ghana, and Zambia are among the countries awaiting the finalization of debt treatment agreements under the G20 Common Framework.
Improved data sharing and clearer timetables are expected to facilitate quicker agreement in individual debt cases, which could lead to progress in Ethiopia’s debt restructuring efforts.
Ethiopia Joins Africa Finance Corporation as 40th Member State
Africa Finance Corporation (AFC) has welcomed Ethiopia as its 40th member state, marking a significant milestone in the corporation’s mission to ensure pragmatic and coordinated infrastructure development across the continent.
As Africa’s second most populous nation, Ethiopia’s membership brings AFC’s support to three-quarters of African countries.
The corporation has identified a $300 million pipeline of projects in Ethiopia, focusing on sectors such as power, renewable energy, logistics, telecommunications, and mining. Ethiopia’s economic reform agenda, initiated in 2019, aligns with AFC membership, providing the country with access to increased investment allocation, reduced debt costs, and advisory services.
Since its inception, AFC has invested $11.5 billion in transformational infrastructure projects across Africa.