Ethiopia China Advance Financial Cooperation
Ethiopia and China Deepen Financial Ties Amid Crucial Debt Restructuring Talks
Addis Ababa/Beijing – In a move underscoring the critical state of Ethiopia’s external finances and its reliance on its key partner, China, the central bank governors of both nations recently engaged in high-level discussions focusing on debt restructuring and enhanced financial cooperation. The meeting between Eyob Tekalign (PhD), Governor of the National Bank of Ethiopia (NBE), and Pan Gongsheng, Governor of the People’s Bank of China (PBC), took place on the sidelines of the World Bank and International Monetary Fund (IMF) Annual Meetings, signaling the urgency of addressing Ethiopia’s fiscal challenges.
A Focus on Debt and Deeper Collaboration
The bilateral talks were laser-focused on strengthening the financial nexus between the two economies. Of paramount importance was the subject of debt restructuring, a cornerstone of Ethiopia’s current economic reform agenda. Discussions also covered mechanisms for enhancing cross-border trade relations, reflecting the deep commercial links between the two countries.
Both governors agreed on the necessity for central banks and financial institutions in Ethiopia and China to deepen collaboration. This alignment is specifically aimed at boosting trade and investment flows, which are vital for Addis Ababa’s long-term economic stability and growth.
NBE Governor Eyob Tekalign reiterated Ethiopia’s commitment to advancing its strategic partnership with China, particularly within the financial sector. This commitment is articulated as being in lockstep with the nation’s ongoing, ambitious economic reform program. The meeting concluded with an agreement to continue technical discussions and cooperation to ensure mutual and long-term economic benefits are sustained.
The Shadow of Restricted Default
The discussions occur against a challenging backdrop for Ethiopia’s credit standing. Earlier today, Addis Standard reported that Fitch Ratings affirmed Ethiopia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘Restricted Default’ (RD). This affirmation is a direct result of the Ethiopian government’s continued failure to meet payments on its Eurobond and other commercial external debt obligations.
Fitch’s assessment highlighted that Ethiopia is actively seeking to restructure approximately $15 billion in external debt. Despite the default status, the agency acknowledged “notable progress” in the country’s macroeconomic reforms, including steps toward exchange rate liberalization and inflation control. However, negotiations with private creditors remain ongoing and challenging.
China’s Pivotal Role in the Debt Process
China’s presence in these discussions is critically important. It is not only Ethiopia’s largest bilateral creditor but also holds the crucial position of co-chair of the Official Creditor Committee overseeing Ethiopia’s debt restructuring. This process is being conducted under the G20 Common Framework, an initiative launched in 2021 to provide debt relief and ensure long-term sustainability for low-income countries facing external payment pressures.
The path toward relief has seen progress. In July 2025, Ethiopia successfully reached a memorandum of understanding with official creditors for $2.5 billion in debt relief through 2028. However, the implementation hinges on the finalization of bilateral agreements including those with its primary creditor, China which are currently being finalized.
The recent meeting between the central bank governors suggests a strong shared commitment to resolving the financial overhang and putting the strategic Ethiopia-China partnership on a firmer, more sustainable footing.
About The Author
