Ethiopia Looks to Public-Private Partnerships to Rein In Debt

(Bloomberg) --

Ethiopia is looking to finance infrastructure development with public-private partnerships as the government seeks to keep a firm hand on debt and maintain one of the fastest rates of economic growth in Africa.

“This is one of the Ministry of Finance's key strategies to maintain the reduction of the fiscal deficits in order to ensure that debt accumulation remains at prudent rates and that public debt remains within sustainable levels,” it said in a report published on its website. The country has stopped borrowing from non-concessional sources and “diversified its sources of concessional borrowing, focusing on non-traditional sources,” it said.

Under Prime Minister Abiy Ahmed, the Horn of Africa nation has made rapid changes to its once tightly regulated political and economic space, including plans to open up state-owned industries, from telecommunications to sugar and power generation, to foreign investors. However, the breakneck pace has been funded largely by debt, prompting the International Monetary Fund to warn in July that the government could face difficulties servicing its debt obligations.

Ethiopia says its public debt is sustainable at about 49% of gross domestic product, lower than the World Bank/IMF threshold of 55%, and forecasts this will “stabilize in the medium term and come down gradually as the government implements prudent fiscal policy commitments.”

Ethiopia's total public debt stood at $53.7 billion at the end of June, up from $49.34 billion a year earlier, according to the latest data from the finance ministry.

To contact the reporter on this story: Samuel Gebre in Addis Ababa at sgebre@bloomberg.net

To contact the editors responsible for this story: Gordon Bell at gbell16@bloomberg.net, Hilton Shone, Robert Brand

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