Domestic debt stock rises to 2.9 trillion Birr
The federal government has disclosed that Eurobond payments initially expected during the current fiscal year have been deferred for five years under ongoing debt restructuring arrangements, while liabilities linked to the state-owned Ethiopian Railway Corporation could be transferred to the Ministry of Finance after the corporation failed to generate sufficient revenue to service its obligations.
Officials stated that payments to China may also begin within the remaining two months of the fiscal year once pending legal agreements are finalized under the country’s debt restructuring process.
The disclosure was made by Finance Minister Ahmed Shide during a review session held by the parliamentary Plan, Budget and Finance Affairs Standing Committee, according to information obtained by The Reporter.
The session reviewed the Ministry’s nine-month implementation performance for the 2025/26 Ethiopian fiscal year.
The Ministry’s report presented a broad picture of Ethiopia’s fiscal, debt, revenue, and macroeconomic performance, while also outlining ongoing negotiations with external creditors and development partners under the country’s macroeconomic reform program.
According to the report, Ethiopia’s total outstanding external debt stock remains at USD 33.5 billion. The debt figure combines obligations held directly by the federal government (USD 22.1 billion) through the Ministry of Finance together with liabilities linked to state-owned development enterprises (USD 11.4 billion).
Meanwhile domestic debt has soared to close to 2.9 trillion Birr, up from 2.1 trillion Birr two years ago.
Ministry officials told MPs that debt carried by state enterprises has declined significantly following macroeconomic reforms that shifted major liabilities previously borrowed from the National Bank of Ethiopia onto the federal budget framework administered by the Ministry of Finance.
Officials further disclosed that some liabilities currently held by the Ethiopian Railway Corporation may soon be transferred to the Ministry because the corporation lacks adequate operational revenue to continue servicing the loans.
The report linked the latest developments to Ethiopia’s ongoing restructuring negotiations under the G20 Common Framework.
According to the Ministry, Ethiopia has already reached agreements with 15 creditor countries under the framework. Bilateral legal agreements with Italy and France have reportedly been signed, while negotiations with China are nearing completion.
Officials stated that once the debt restructuring process is finalized, Ethiopia is expected to move from what they described as a “high risk” debt classification to a “moderate risk” level.
The Ministry also stated that Eurobond obligations originally anticipated during the current fiscal year have now been pushed back by five years, reducing immediate external repayment pressure on government finances.
The report added that payments to China could begin within the remaining months of the fiscal year once final legal arrangements are completed.
Ministry officials disclosed that while the federal budget allocated just over 64 billion Birr to debt service this year, over 77 billion Birr has been directed to debt repayment over the first three quarters. This includes nearly 27 billion Birr in interest payments.
At the same time, officials acknowledged that domestic debt levels continue to rise, owing largely to a sharp increase in government borrowing through treasury bills and bond sales during the reporting period.
The federal budget anticipated a fiscal deficit of 277.5 billion Birr for the 2025/6 fiscal year, and the government had initially banked on raising 208 billion Birr through treasury bill borrowing. However, actual domestic borrowing through treasury bills and bond sales reached 234.4 billion Birr during the reporting period.
The Ministry attributed the higher borrowing level partly to delays in expected external budget support that had initially been scheduled to arrive in January.
The delayed support has since entered government accounts, officials said, with more than 100 billion Birr reportedly disbursed recently.
They indicated that treasury bill issuance is expected to decline significantly during the coming quarters as external financing and budget support linked to institutions including the World Bank enters the treasury system.
The Ministry also reiterated that no direct advances had been taken from the National Bank of Ethiopia during the nine-month period to finance the budget deficit. Instead, authorities said the fiscal deficit had been financed through treasury bills, bond sales, and support from development partners.
The report further disclosed that Ethiopia had secured a little over one billion dollars in external budget support from the World Bank and other development partners during the reporting period.
Additional support is expected during the remaining months of the fiscal year following discussions held in the United States with the World Bank and the International Monetary Fund, according to the Ministry.
Authorities also claimed donor confidence in Ethiopia’s macroeconomic reform agenda had improved significantly.
The report cited multiple Development Policy Operations and direct budget support arrangements, including an initial 1.5 billion-dollar package, a second two-billion-dollar package, and another support package under negotiation involving the World Bank and Italy totaling around 1.6 billion dollars.
The European Union was also said to have unlocked nearly 100 million euros in budget support, while Germany and France were preparing additional financing arrangements.
Officials described the relationship with development partners as “very strong,” noting a shift from project-based assistance toward direct budget support mechanisms.
The Ministry additionally addressed the suspension of USAID operations, stating that the closure affected health, education, food assistance, and capacity-building programs previously supported by the agency.
Despite the suspension, authorities stated that negotiations with the United States government resulted in a new commitment framework exceeding one billion dollars annually in future support flows.
On the revenue side, the report showed substantial growth in federal tax collection.
Federal tax revenue collected during the first nine months reportedly increased from 548.4 billion Birr in the previous fiscal year to 987 billion Birr during the same period this year. Officials hope the jump will ensure a rise in Ethiopia’s tax-to-GDP ratio from 7.8 percent to above 9.2 percent.
The Ministry described federal revenue performance as operating at a “very strong level” and attributed the improvement to tax policy reforms, administrative modernization, customs reform measures, and expanding digitalization systems.
The report disclosed that total federal expenditures over the nine-month period had topped 1.34 trillion Birr, while actual spending reached 1.2 trillion Birr. Officials stated that expenditure implementation remained largely aligned with the approved fiscal framework. Parliament has approved a 1.97 trillion Birr federal budget this year.
Of the total spent so far, 615 billion Birr was allocated to recurrent spending, while 261 billion Birr went toward capital expenditure. An additional 326.6 billion Birr was transferred to regional states.
The report indicated that actual transfers to regional governments exceeded planned levels due to supplementary wage-related support arrangements.
The Ministry also outlined extensive subsidy and support expenditures implemented during the reporting period. Authorities stated that 43 billion Birr had been allocated as tax subsidies for essential food commodities, while 82 billion Birr was allocated for fertilizer subsidies.
Combined expenditure on fuel subsidies, food security programs, and broader social support measures reached 275 billion Birr during the reporting period.
The report also contained government claims that inflation had declined to 9.4 percent in March, which officials attributed to coordinated fiscal and monetary policy measures implemented under the macroeconomic reform program.
At the same time, the report projected that Ethiopia’s economic growth would reach 10.2 percent during the current fiscal year.
“This is not only among the fastest growth rates in Africa, but also in the world,” the presentation stated.
The Ministry additionally reported progress in electronic public finance reforms.
Officials stated that electronic payments totaling 468.1 billion Birr had been processed during the reporting period, while the Integrated Financial Management Information System, known as EFMIS, had expanded to 147 federal institutions.
According to the report, 97 percent of the federal government budget approved for the fiscal year is currently administered through the EFMIS system.
Authorities also disclosed that 553 cyber threats targeting EFMIS, electronic procurement systems, and official government email infrastructure had been blocked during the reporting period.
