Finance Minister Ahmed Wants Sustainable Debt, Not Simply Available Loans

Jun 1 , 2024

Ethiopia's Finance Minister, Ahmed Shedie, issued a stark reminder about the importance of sustainable debt practices during a panel at the African Development Bank (AfDB) annual meetings in Nairobi, Kenya. He stressed that debt should not be taken simply because it is available but should be leveraged when proven sustainable, marking it as a responsibility. His remarks come as Ethiopia finds itself among 22 African economies that are highly indebted or on the brink of default. The country's external debt has reached 28 billion dollars, part of the 1.15 trillion dollar debt stock held by African countries, nearly twice the continent’s GDP. The debt dilemma was a prominent topic at the AfDB meetings, where African leaders and financial experts debated balancing debt management with economic growth. Minister Ahmed advocated for using debt to spur economic development while maintaining sustainability. "The most important thing is what you do with the debt," he asserted. Ahmed pointed to domestic resource mobilisation and prudent external and local borrowing as key strategies, despite being faced with an economy that generates only eight percent of its GDP in taxes, well below the 13pc average for sub-Saharan Africa. The panellists also discussed the importance of balancing domestic and external debt. They discussed while domestic borrowing can reduce foreign exchange risks, it also has implications for the domestic economy. Finance Minister Ahmed agreed that domestic resource mobilisation could be crucial but argued that responsible borrowing practices must complement it. He outlined Ethiopia's efforts to balance domestic and external debt while focusing on generating growth and exports.