Ethiopia's external debt: The impact and the way forward

This paper reviews the status of Ethiopia's external debt, identifies the c onditions that led to its growth, and suggests means to reduce it. More spe cifically, the paper examines the conditions under which the objectives of reducing poverty in Ethiopia can be achieved. Not only is the country's deb t unsustainable, but also, even though large amounts of debt relief were al lowed, they will not be sufficient for the country to fulfill its responsib ility toward global poverty reduction goals. Assuming there's no change in income distribution, Ethiopia would have to increase its GDP by more than 8 % a year over the next twenty years to allow the country to meet internatio nally agreed poverty reduction targets. Complete debt forgiveness, accompan ied by additional resource inflows will be necessary if an attempt is to be made to meet that objective.