A report from the Ethiopian Ministry of Finance and Economic Development (MOFED) indicates that the country’s runaway external debt has increased dramatically from the total and official 134 billion birr (US$8b) at the end of June last year to 200 billion birr (US$12). The document also reveals, the government’s internal debt has also exceeds well beyond 60 billion birr.
According to experts from the Ministry, the 200 billion birr debt doesn’t include the recent massive loans such as the $3 billion from China for the construction and expansion of rail way systems as well as the US$300 million loan from Exim Bank.
Out of the 134 billion birr debt, 85 billion birr loan was found from multilateral creditors like the IMF, World Bank and the African Development Fund, while the remaining 49 billion birr comes from bilateral creditors like China, India, Kuwait as well as from commercial lenders like Exim Bank.
Loans from multilateral creditors are generally payable within 40 – 50 years at an interest rate of 0.75 percent and 10 years grace period. Loans from commercial lenders like the Chinese Exim Bank are payable within 20 years at an interest rate of 2 percent and 7 years grace period.
As the amount of loan increases, the principal and interest of that amount has also increases every year. For example, this year alone, Ethiopia is required to pay a total of 3.8 billion birr for the principal and interest of the 134 billion birr total debt.
Though Ethiopia brags it needs no assistance to build the much hyped US$5 billion worth mega dam on the Nile river, all signs on the ground shows that it indeed needs a ‘mega loan’ from those same creditors before it got along anywhere with its controversial 5 year growth and transformation plan (GTP).
That only means one thing: The more the government borrows, the less likely it end up paying the growing debt and that eventually led to upset the economy besides leaving a debt-ridden generation behind.