The United Nations (UN) has identified Ethiopia as a high-risk borrower in East Africa despite the country’s better economic performance in recent years.
In its World Economic Situation and Prospects 2026 report issued over the weekend, the UN projects Ethiopia’s GDP will expand by 6.3 percent in 2026, supported by improved macroeconomic stability, robust agricultural output, and favorable commodity prices.
It said growth in the group of Least Developed Countries (LDCs) is expected to reach 4.6 percent in 2026 and 5.0 percent in 2027, up from 3.9 percent in 2025, though still below the Sustainable Development Goal target of 7 percent.
“Ethiopia, along with Bangladesh and the United Republic of Tanzania, is among the LDCs driving this stronger performance,” it said.
The report noted that Ethiopia is one of seven African countries remaining in debt distress at the end of 2025, while fourteen others are classified at high risk.
East Africa is projected to grow 5.8 percent in 2026, led by Ethiopia and Kenya, yet sub-regional growth remains below the 2010–2019 average, with only Rwanda and Uganda surpassing pre-pandemic performance. Fiscal constraints and ongoing security risks, including conflict in South Sudan, weigh on the outlook.
The UN highlights that high borrowing costs, declining Official Development Assistance, and external shocks such as higher US tariffs may limit Ethiopia’s ability to invest in social services and infrastructure, threatening progress toward development goals.
Separately, Ethiopia has been actively engaging in debt restructuring. Under the G20 Common Framework, it reached an agreement in principle with official creditors covering about $8.4 billion of external debt.
Negotiations with private investors over its $1 billion eurobond, which defaulted in late 2023, produced a draft restructuring deal in early 2026, although some non-financial terms remain under discussion. Ethiopia continues to coordinate with the IMF, World Bank, and Kuwait Fund as part of broader fiscal and macroeconomic reforms.
MG/as/APA