The Challenges of Debt Sustainability in Africa: The Case of Ethiopia
"The development challenges facing sub-Saharan Africa are deep-rooted and numerous. In the case of Ethiopia, they include acute poverty (44.2% of its population below the poverty line); historically low economic growth (averaging 2.6% over the last four decades); the spread of HIV/AIDS infecting about 10.6% of the adult population; underdeveloped infrastructure and lack of provision of social services, ranging from health to education. In an attempt to critically assess the challenges of debt sustainability in Ethiopia, this report begins with a brief outline of the country’s background and reviewed the state of the Ethiopian economy and the major government policy initiatives undertaken in recent years. Then the paper examined the various approaches to debt sustainability before delving into analyzing the sustainability of the Ethiopian debt. Two approaches are used to evaluate the sustainability of the Ethiopian debt: the first approach relied on the evaluation of the multilateral institutions (The IMF and World Bank) in which their staff have regularly carried out Ethiopia’s debt sustainability analysis using various parameters; and the second is based on the author’s analysis, using a model based on the evaluation of the fiscal balance of the country."