September 24, 2021
Ratings agency S&P Global cut Ethiopia’s sovereign rating to ‘CCC+’ from ‘B-’ on Friday, citing heightened political instability and delays to debt restructuring.
War broke out 10 months ago between Ethiopia’s federal troops and forces loyal to the Tigray People’s Liberation Front, which controls Tigray, and spread into the neighboring regions of Amhara and Afar in July. Fighting in those two regions has displaced hundreds of thousands of people and made about 1.7 million dependent on food aid.
“The escalation of the Tigray conflict, which broke out in November 2020, threatens the government’s transformative reform agenda,” S&P said in its statement. (bit.ly/3CMPkvh)
Last week, the Ethiopian government requested a new extended credit facility from the International Monetary Fund to replace an expired component of an existing lending program.
Meanwhile, Ethiopia’s creditors’ committee held its first meeting on Sept. 16 in a bid to restructure its debts under the joint G20’s common framework and help create stable economic fundamentals.
S&P expects the country’s domestic markets to play an increasingly dominant role in financing Ethiopia’s budget deficit over the agency’s forecast through 2024.
The agency maintained its outlook for Ethiopia at negative, which reflects potential inclusion of commercial creditors in debt restructuring plans and increasing pressures on availability of external funding.
Reporting by Bhanvi Satija in Bengaluru; Editing by Krishna Chandra Eluri