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Plug $10 Billion Hole and Prosper, UN Economists Tell Ethiopia

Bloomberg logoBloomberg 9/10/2019 David Malingha

(Bloomberg) -- Ethiopia must attract new investment and reduce its debt if it’s to achieve the government’s economic growth and job creation targets, according to the United Nations Economic Commission for Africa.

The Horn of Africa nation has a $10 billion gap -- $6 billion in new investment and $4 billion of debt reduction per year -- that must be bridged to achieve its reform aspirations, UNECA Executive Secretary Vera Songwe said in an emailed statement.

“If you continue to accumulate debt the way you’re doing now, you will likely fall into debt distress in the next two years,” Songwe said about Ethiopia. “A lot of the structural reforms you’ve put in place will not bring in the private sector because you will not be a creditworthy country.”

Ethiopia’s government debt climbed to 60% of gross domestic product last year, which places the country at risk of debt distress, International Monetary Fund Africa Department Director Abebe Selassie said in July. Songwe’s comments came after Prime Minister Abiy Ahmed outlined a plan to keep Ethiopia among the fastest-growing economies globally, while creating jobs for the 11 million unemployed people, about 10% of the population, and alleviating widespread poverty.

Abiy has made rapid changes to the country’s once tightly regulated political and economic space since he came to power last April, with plans to open up state-owned industries, from telecommunications to finance and power, to more foreign investment. In February, he said the government had rescheduled 60% of its loan repayments to 30 years from 10 years because it wasn’t generating enough to pay off debt that the state took to finance huge projects.

To contact the reporter on this story: David Malingha in Nairobi at dmalingha@bloomberg.net

To contact the editors responsible for this story: John McCorry at jmccorry@bloomberg.net, Rene Vollgraaff, Michael Gunn

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