Fitch Downgrades Ethiopia Due to Increasing Default Risk, Reports Reuters

Fitch Downgrades Ethiopia’s Credit Rating Amid Debt Concerns

JOHANNESBURG/LONDON – Fitch Ratings has downgraded Ethiopia’s credit rating to CC from CCC-, placing the country further into junk territory. The agency highlighted significant gaps in the nation’s external financing, which have increased the risk of default.

Ratings classified as CC indicate that a default is imminent. This downgrade pertains to Ethiopia’s foreign currency debt and reflects what Fitch described as a "probable risk of default" while the country seeks debt relief under the G20’s "Common Framework" agreement.

According to Fitch, a substantial decline in external liquidity coupled with considerable external financing gaps has heightened the likelihood of a default event. Ethiopia, which is Africa’s second most populous country, has been grappling with a debt burden estimated at $28.2 billion as of the end of March, following a devastating two-year civil war that concluded last year.

In early 2021, Ethiopia requested a debt restructuring as part of the Common Framework initiative introduced during the COVID-19 pandemic to assist low-income nations facing debt crises.

Fitch also pointed out that delays in the Common Framework process, which involves China, and slow progress in securing a bailout from the International Monetary Fund (IMF) have left the country in a desperate cash position.

The agency expressed concerns that any bilateral liquidity relief would likely fall short of addressing the significant financing gaps and improving the country’s debt sustainability in the medium term, particularly without renewed support from international financial institutions.