Ethiopia is negotiating with its creditors to convert commercial loans into concessional loans, loans with lower interest rates and more favourable terms. Prime Minister Abiy Ahmed addressed Parliament stating that the country’s foreign debt has dropped to less than US$23 billion, and signalled a halt to new commercial-loan acquisitions.

This shift builds on earlier macro-economic reforms. Ethiopia has already restructured between US$4–4.5 billion of foreign loans under more favourable terms. The government is also using the G20’s Common Framework for debt treatment and appealing for outstanding commercial creditors (including Eurobond holders) to join the concessional path.

While this strategy could significantly ease Ethiopia’s debt-servicing costs and improve sustainability, there are potential risks. Commercial creditors still pressing for payment under original terms could complicate negotiations. The success of the move depends on securing creditor buy-in, maintaining reforms and building export capacity to back repayment.