Assessment of Public Debt Management Practice in Ethiopia
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Date
2014-06
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Publisher
Addis Ababa University
Abstract
Ethiopia’s external debt stock has risen rapidly and has almost quadrupled even if debt relief was
granted under the Heavily Indebted Poor Countries /Multilateral Debt Relief Initiative
(HIPC/MDRI) in 2006 and other problems being facilitated. The impact of this debt burden is
enormous in economic and human development of Ethiopia which can be observed from the debt
overhang. This entails a need for more comprehensive study which rigorously examines public
debt management practices in Ethiopia.
Hence, the purpose of this study was to assess the debt management strategy and the precise debt
management practice of Ethiopia starting from 2002 after Ethiopia restarts debt management
practice from ground due to the debt relief and debt cancellation granted by various multilateral
and bilateral creditors up to 2011.
The research employed a descriptive research analysis which involves both quantitative and
qualitative tools to drive concrete findings. In order to extract the necessary information for the
study, document review was considered as the major tool for secondary data gathering while
primary data was gathered through key informant interview with directors and managers of debt
management unit in the Ministry of Finance and Economic Development.
In visualizing the major components of Ethiopia’s debt management strategy the main objective
focuses on debt sustainability analysis and gives less attention to parts of debt management
strategy such as, fiscal, legal, institutional and operational measures. Despite the efforts in debt
management activities, it is still at nascent stage and not performing at its maximum potential.
The major challenges faced by debt management practices includes; shortage of human labor
force, minimum skills of negotiating teams as well as those who engaged in monitoring and
evaluation process, lack of debt management strategy, inaccessibility of alternative creditors to
make a choice, late disbursement made by creditors after loan agreement signing, the inability of
the government to fund expenditures from treasury and non existence of past performance
evaluation process. According to the debt management directorates study, even if Ethiopia’s debt
is affordable, the time to time plan of the government necessitating large amount of finance may
put
risk
on
future
debt
capacity
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Keywords
Ethiopia, Public debt management Practice in ethiopia