May 18 , 2021
Ethiopia's credit rating further deteriorates as its latest application for debt relief under G20 framework undermines its ability to repay debt to private creditors.
The US-based rating agency, Moody's Investors Service (Moody's), downgraded Ethiopia's long-term issuer and senior unsecured ratings from B2 to Caa1, signalling that the second biggest East African economy is on the brink of defaulting on its foreign debt.
Moody's is the latest amongst globally-accepted agencies to cut the country’s credit rating following its application for debt treatment under the common framework, which was agreed to and signed by the G20 countries and the Paris club creditors to offer borrowing countries the options of rescheduling or reducing their debt.
Fitch Ratings downgraded Ethiopia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC' from 'B' on February 2021, as such a move explicitly raises the risk of a default event.
Likewise, Moody's downgrade to Caa1 reflects that protracted deliberations regarding Ethiopia's application for debt relief under the G-20 Common Framework have increased the risk of private sector creditors incurring losses.
Ethiopia's external debt stood at 25 billion dollars at the end of last fiscal year, of which little over 10pc is owed to private creditors.
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