|World Bank Requests MEFMI in Preparing Ethiopia’s MTDS|
The fiscal accounts have traditionally been prudently managed, with the primary deficit maintained below 2 per cent of GDP, although this is expected to widen to 2.8 per cent of GDP in 2012/13 under the Protection of Basic Services program. This will likely divert the course from grants and concessional financing sources to semi and non-concessional loans. The existing debt portfolio of the central government is characterized by low cost but with a high degree of exposure to foreign exchange risk.
The overall public sector debt portfolio (including guaranteed and non-guaranteed debt to SOEs) has a higher cost, but with a more mixed balance between external and domestic debt. The 2012 World Bank/IMF debt sustainability analysis indicates that Ethiopia’s external debt is at a low risk of debt distress, although sensitive to terms of new borrowings and export value growth. Moreover, the sustainability of the public debt depends on the assumption of continued robust GDP growth, moderate public sector primary deficits, and the current policy of keeping the domestic real interest rates negative.
To finance public investment at relatively low cost with due consideration of risks, the Government through the Ministry of Finance and Economic Development invited the World Bank and IMF to conduct training and assist the country officials in the formulation of a Medium Term Debt Strategy. The World Bank requested MEFMI to nominate one officer to join the team to help the country prepare debt data for the MTDS and Mr Lekinyi Mollel, Debt Management Programme Officer was nominated to join the Mission. Other officials who were in the mission were Ms. Eriko Togo, (the mission leader from IMF), Mr. Dino L. Merotto, Ms. Abha Prasad, and Ms. Mizuho Kida (all from the World Bank), and Mr. Michel Vaugeous from Debt Relief International (see Annex I). The mission visited Addis Ababa, Ethiopia, from 9 to 19 October 2012. While in Ethiopia, the mission team conducted training on the use of MTDS Analytical tool and assisted in producing a draft of medium term debt management strategy.
The 25 participants for the training were drawn from various directorates in the Ministry of Finance and Economic Development as well as from the National Bank of Ethiopia. The training targeted senior, middle-level and junior officials who would be involved directly in developing and reviewing the MTDS.
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