Ethiopian News and Opinion Forum


(Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 09 Oct 2012, 10:11



Ethiopia’s External Debt Exceeds US$12 Billion

የአገሪቱ የውጭ ዕዳ ከ134 ቢሊዮን ወደ 200 ቢሊዮን ብር ማሻቀቡ ተነገረ

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A report from the Ethiopian Ministry of Finance and Economic Development (MOFED) indicates that the country’s runaway external debt has increased dramatically from the total and official 134 billion birr (US$8b) at the end of June last year to 200 billion birr (US$12). The document also reveals, the government’s internal debt has also exceeds well beyond 60 billion birr.

According to experts from the Ministry, the 200 billion birr debt doesn’t include the recent massive loans such as the $3 billion from China for the construction and expansion of rail way systems as well as the US$300 million loan from Exim Bank.

Out of the 134 billion birr debt, 85 billion birr loan was found from multilateral creditors like the IMF, World Bank and the African Development Fund, while the remaining 49 billion birr comes from bilateral creditors like China, India, Kuwait as well as from commercial lenders like Exim Bank.

Loans from multilateral creditors are generally payable within 40 – 50 years at an interest rate of 0.75 percent and 10 years grace period. Loans from commercial lenders like the Chinese Exim Bank are payable within 20 years at an interest rate of 2 percent and 7 years grace period.

As the amount of loan increases, the principal and interest of that amount has also increases every year. For example, this year alone, Ethiopia is required to pay a total of 3.8 billion birr for the principal and interest of the 134 billion birr total debt.

Though Ethiopia brags it needs no assistance to build the much hyped US$5 billion worth mega dam on the Nile river, all signs on the ground shows that it indeed needs a ‘mega loan’ from those same creditors before it got along anywhere with its controversial 5 year growth and transformation plan (GTP).

That only means one thing: The more the government borrows, the less likely it end up paying the growing debt and that eventually led to upset the economy besides leaving a debt-ridden generation behind.

http://www.ethiopianreporter.com/news/2 ... 0----.html



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby whereisthefrog » 09 Oct 2012, 10:52


Someone has to explain the difference between borrowing and begging to weyane.



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 09 Oct 2012, 11:09


whereisthefrog wrote:Someone has to explain the difference between borrowing and begging to weyane.


Last year I had a good laugh reading one of AIGA FORUM's silly editorials accusing the Ethiopian Diaspora of lobbying the IMF and the World Bank to stop giving "AID" to Ethiopia. Banks give loans, not AID. But come to think of it, if the woyane thieves are not the ones who will be repaying the US$12 billion dollars debt, it is indeed "AID" by definition. Ignorance is a bliss.



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 09 Oct 2012, 14:34


The countries that are on the IMF's list of heavily indebted countries are forced to subscribe to IMF's Structural Adjustment Program (SAP), in which their economies are controlled by outside forces so that the foreign debt can be paid back in full. For example, land grab is used as a means to generate revenues required to repay the foreign debt.

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Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 09 Oct 2012, 14:44


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    “We buy things we don't need with money we don't have to impress people we don't like.”― Dave Ramsey.

So, what are the consequences for failure to pay off the HUGE US$12 Billion dollar debt? What if the creditors decide to sell the debt to vulture funds? :shock:

Let's learn from Zambia's experience.... I warn you, it's not pretty.


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Vulture Funds: Feasting on Poverty

At a time when the rich world is slowly moving towards eradicating extreme poverty in the developing world, a small band of private companies is looking to make a killing.

Vulture Funds, a name popularly ascribed to a particular type of commercial creditor, buy portions of developing countries’ debt at a cheap rate and then sue the countries and make a considerable profit.

Such commercial activity has wide-reaching implications. It takes away much needed revenue from developing countries and undermines benefits such as spending on education and healthcare that should accrue from debt cancellation. The very existence of Vulture Funds points to an urgent need for stronger company regulation, both at the national and international levels, and for a fair and comprehensive international system to deal with the pressing issue of debt in developing countries.

Earlier this year a High Court case in London involving Zambia vs Donegal International demonstrated how Vulture Funds seek to profit from poor countries with a record of debt management problems.

In 1979, the Zambian government borrowed $15 million (£7.5m) from Romania to purchase Romanian tractors and other agricultural equipment. However, a combination of factors, not least the fall in copper prices, on which Zambia is highly dependent, meant Zambia was unable to pay back the debt. Some 20 years later the Zambian government continued to have debt repayment problems and negotiated a deal with Romania under which it would pay back only $3.5 million of the amount borrowed. Zambia was given a deadline of 31st January 1999 to confirm this offer, but on 19th January, 12 days before the deadline, Donegal International, a subsidiary of US company Debt Advisory International, bought the debt from Romania for $3.3 million.

Having procured the debt, Donegal International then attempted to sue the Zambian government for $55 million; the full cost of the original loan plus 5.5% yearly compound interest and court fees.
:shock: They undertook this action at a time when Zambia had been recognised by the World Bank and IMF as a highly indebted poor country and had had its debts from these and other institutions cancelled.

Donegal International applied the legal principle of Pari Passu, which requires that all creditors “should be treated on equal terms without discrimination”. In other words, the fact that some creditors, such as the IMF and the World Bank, had forgiven their portion of the debt, does not mean that other creditors have to make similar concessions or, indeed, any concessions at all. It is worth noting that this principle does not apply to domestic debt as under UK law all creditors must abide by any debt relief planagreed by creditors who own 75% of an individual’s debt.

When the case was heard at the High Court in London earlier this year, the Judge concluded that Donegal International’s claim was legal but the company had improperly sought and obtained confidential state information, an action which he described as "unlawful or immoral". At the time the Zambian Justice Minister, George Kunda, described the company’s behaviour as showing a “consistent pattern of irregularity, corruption, and fraud.” The Judge ruled that the Zambian government would have to pay $15.5 million.

Whilst this figure was substantially less than Donegal had originally claimed for, it was far more than Zambia can afford. To put this in perspective, $15 million is roughly three quarters of the amount the Zambian government has allocated to spend on recruiting teachers in 2007. It is money that is badly needed elsewhere in a country where one in three children do not attend primary school, up to a fifth of the population are living with HIV/AIDS, and the average life expectancy is 37 years. Indeed, a recent United Nations Development Programme report found that, in order for Zambia to fund the programmes necessary to halve poverty and meet the Millennium Development Goals by 2015, it should substantially increase spending to 5.5% on health, 1.9% on water and sanitation and 2.7% on social safety nets. These crucial life and death targets will be even more out of reach if Zambia is forced to make this payment at the expense of its citizens.

Unfortunately, the case of Zambia is not an isolated incident. A particularly notorious case was Elliot Associates vs Peru. Elliot Associates, a US firm, successfully sued the Peruvian government for $58 million on a debt they had procured for $11 million and then took out a legal injunction preventing Peru from paying its other creditors until they had been paid in full. The World Bank has calculated that 43 companies are currently pursuing court cases in 10 more countries, from the war-torn Democratic Republic of Congo to Nicaragua and Honduras.

It is clear that this form of corporate activity undermines efforts by developed countries to free up much needed resources to help poorer countries out of poverty. In some instances developing countries are being assisted to buy back their debts from commercial creditors and given help with their legal expenses. When Chancellor, Gordon Brown, in a speech to the UN, said that Vulture Funds are “morally outrageous” and that the “international community should consider giving technical assistance to any Highly Indebted Poor Countries being sued by a Vulture Fund, and provide them with expert financial advice on debt restructuring to prevent future legal claims.”

However, this is essentially treating the symptom and not the cause of the problem. Inspired by Catholic Social Teaching, with its emphasis on addressing the root causes of problems, the Scottish Catholic International Aid Fund (SCIAF) has launched a campaign to pressure the UK government to change the law to prevent future Vulture Fund cases. With nearly a third of these companies operating out of UK territory, such as the British Virgin Islands and Caymen Islands, SCIAF believes legal action to tackle these corporate ventures must start at home with domestic solutions and be accompanied by international agreements on sustainable debt resolution.

At the moment many Vulture Funds, by virtue of being private companies, are not covered by key rules designed to govern the behaviour of the UK’s public companies. As such, the 2006 Companies Act which states that companies must not just consider their profit margin, but must also have regard to the social and environmental impact of their actions, is not applicable to them.

For these reasons, SCIAF’s campaign is asking the UK government to amend the Companies Act, to close the loopholes that exclude Vulture Funds, and to introduce new laws to combat the problem. In taking action, the UK government would be following in the footsteps of the United States which has prohibited the purchase of debts solely for the purpose of litigation, and of Belgium which, following the case of Elliot Associates vs Peru, changed its laws to prevent such cases recurring. SCIAF is also calling for the UK government to work internationally to establish a fair and transparent international system to deal comprehensively with developing countries’ debt, to cut opportunities for corporate vultures to feed off poverty stricken countries.

Article originally published in Tablet magazine.
http://www.sciaf.org.uk/news/feature_ar ... on_poverty
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Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 09 Oct 2012, 19:18



Fayon,
Do you know that the World Bank is not a charity organization ?
:oops:



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby eritreawi » 09 Oct 2012, 19:34


Revolutions,

Once a country "recieves" loans from WB and the IMF it is game over, the country is on the hook, one dirty little secret no one is told about is the selling and reselling of the debt to hedge funds and so called investors, this is how it works;

A country takes a loan from WB, IMF or other institutions, then those institutions sell those debts mainly to hedge funds who are empowered to add interest to the debt they bought, they in turn force the indebted country to pay more in interest payments in return for extending the repayment period, that is how they make most of their profits.

In other words once a country is forced into debt it will stay in debt, will not be in charge of its decisions and become a neo-colonial possession of global corporations, this is the dirty secret almost all Ethiopians are not aware of, even if they manage to get rid of woyanne, they will have to make a choice of being slaves their "creditors" or declare their economic indepence which is much easier said than done. In this forum I don't see Ethiopians willing to discuss this issue.



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby revolutions » 10 Oct 2012, 19:42


eritreawi wrote:Revolutions,

Once a country "recieves" loans from WB and the IMF it is game over, the country is on the hook, one dirty little secret no one is told about is the selling and reselling of the debt to hedge funds and so called investors, this is how it works;

A country takes a loan from WB, IMF or other institutions, then those institutions sell those debts mainly to hedge funds who are empowered to add interest to the debt they bought, they in turn force the indebted country to pay more in interest payments in return for extending the repayment period, that is how they make most of their profits.

In other words once a country is forced into debt it will stay in debt, will not be in charge of its decisions and become a neo-colonial possession of global corporations, this is the dirty secret almost all Ethiopians are not aware of, even if they manage to get rid of woyanne, they will have to make a choice of being slaves their "creditors" or declare their economic indepence which is much easier said than done. In this forum I don't see Ethiopians willing to discuss this issue.


You're absolutely right. I remember not long ago, there was a news report about a US based Vulture Fund suing the Democratic Republic of Congo for $100 million dollars over a $3 million dollars loan that was taken out some 30 long years ago. Can you believe that! The Funds are vicious! Ethiopia is also currently involved in lawsuits with two Vulture Funds, namely Kintex based in Bulgaria, and Yugoimport based in Serbia, both demanding payments of several hundred millions of dollars for original debts worth much much smaller than what Ethiopia is being asked to cough up.

The IMF and the World Bank don't like the Vulture Funds because they view them as competitors, albeit on a smaller scale. Last month the IMF urged the TPLF regime to "slow down" the Renaissance Dam project that all international lenders have refused to fund. Reading between the lines, I almost get the impression that the IMF is trying to discourage the TPLF regime from going to loans sharks to borrow money for the project, since it has become apparently clear that the regime is unable to raise more than 3% of the required funding for a project estimated to cost US$5 billion dollars.

Of course the IMF is only concerned about how Ethiopia is going to service the HUGE US$12 billion debt to the IMF if the TPLF regime accumulates more debt it cannot afford to make payments. The TPLF regime is also only concerned with symbolism the project offers rather than the consequences of debt left to future generation of Ethiopians. Like Tesfaye Gebreab said, "Ethiopia is currently ruled by individuals devoid of patriotism and national interest."



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby Awash » 11 Oct 2012, 02:02


It looks like shabo has given up on the Null & Void EEBC aka Badime. 'It's the economy stupid' :mrgreen:



Re: (Shocking!) Ethiopia’s External Debt Exceeds US$12 Billion Dollars

Postby Ageresseb » 11 Oct 2012, 04:03


This comment is not bad to damage the Ethiopian Image. That is why it will be thrown away.

However; Just for...

***
Last April, the IMF projected a -7.3% GDP contraction in Sudan for 2012 but today the world financial institution changed that number to -11.2%.

The IMF estimated that Sudan’s external debt have grown by 27% since 2008 from $32.6 billion to $41.4 billion in 2011. The IMF projected debt levels to reach $43.7 billion in 2012 and $45.6 billion in 2013. The latter represents 83% of Sudan’s 2011 GDP number of $55.1 billion.

Population:
Ethiopia: 80 million
Sudan: 32 million

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