U.S. Government Forgives Ethiopia’s External Debt of US $71.4 million

January 5, 2005
No. 01/05

Addis Ababa (U.S. Embassy) -- On December 30, the United States Government signed an agreement with the Federal Democratic Republic of Ethiopia (FDRE) to cancel US$71.4 million (equivalent to 617.9 million Birr) in external debt. The Ethiopian debt treated by this agreement was held by the United States Department of Agriculture (USDA) and by the United States Agency for International Development (USAID). This is the second time in the past 24 months that the U.S. has provided debt relief to Ethiopia – in January of 2003, a Debt Relief Agreement was signed between Ethiopia and the United States amounting to US$29.2 million (253 million Birr). Both cancellations total US$100.6 million or 870.9 million Birr.

During the September 2004 meetings of the IMF and World Bank in Washington, the US put forward a proposal for debt relief that went much further than previous plans; President Bush proposed a 100% reduction in the debts of the world’s poorest countries. The US Government recognizes, along with others, that debt relief is an important policy for development, and is taking a leading role in promoting debt sustainability through a number of channels. The United States Government has provided 100 percent debt forgiveness to Ethiopia, in recognition of Ethiopia’s embrace of sound policies and commitment to use the savings from debt relief to improve the lives of ordinary citizens through investments in education, health and other sectors of society that increase growth and alleviate poverty.

The United States congratulates Ethiopia on reaching the HIPC completion point in April 2004. Under HIPC, Ethiopia has qualified for US$758m of debt relief, which in real terms will save it US$100m a year in debt service payments. This reflects the progress of the Ethiopian Government in developing a poverty reduction strategy, implementing structural reforms and social policies, and maintaining macroeconomic stability. HIPC represents an important opportunity for Ethiopia to continue to pursue reforms and promote policies that will improve the lives of its citizens. The US Government is pleased to assist the government of Ethiopia in its development efforts, both through bilateral debt relief and its contributions to the HIPC program.