Approved by: Prepared by the staff of the International Manuela Francisco and Hassan Zaman (IDA), Development Association (IDA) and the and Annalisa Fedelino (IMF) International Monetary Fund (IMF) THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA JOINT BANK-FUND DEBT SUSTAINABILITY ANALYSIS1 Risk of external debt distress In debt distress Overall risk of debt distress In debt distress Granularity in the risk rating Unsustainable Application of judgment No Ethiopia faces political, economic, and humanitarian challenges. Support from the international community weakened notably during the two-year conflict in Tigray but is now resuming. Bunching of debt service in the near to medium term and adverse developments have led to the realization of debt repayment risks. Ethiopia’s debt is assessed to be unsustainable, mainly due to protracted breaches of exports -related external debt indicators and is based on a weak Debt Carrying Capacity (DCC). 2 Following a missed Eurobond interest payment in December 2023, the country is in debt distress. Timely implementation of the authorities’ reform agenda and debt relief from external creditors are required to alleviate liquidity pressures and restore debt sustainability. The authorities have committed to achieving a moderate risk of debt distress rating by the end of the approved ECF arrangement. An Official Creditor Committee under the G20 Common Framework (OCC) was formed in September 2021, and agreed to suspend debt service due in 2023 and 2024 on November 9,2023. 1 This preliminary analysis is based on the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries (LIC- DSF) that was approved in 2017. 2 The downgrade to “weak” followed two successive weak signals in April and October 2022. The composite indicator based on the October 2024 World Economic Outlook (WEO) and 2023 World Bank Country Policy and Institutional Assessment (CPIA) data that was published in July 2024, is currently estimated at 2.47. Ethiopia’s CPIA has trended down since 2020 and has been important contributor to the decline in the CI score. 1 >>> Creditors provided financing assurances for a debt treatment consistent with the IMF-supported program and agreement with the authorities on a term sheet for debt treatment is on track by the second review. This assessment is based on the assurances provided by the co-chairs by letter to the Ethiopian authorities as well as the OCC meetings held on December 4, which reviewed debt treatment perimeter and the authorities’ request for extension of the debt service suspension. Further OCC meetings on specific debt treatment proposals are expected in December 2024. 1. Debt coverage under this Debt Sustainability Analysis (DSA) is consistent with the LIC – DSF guidance and previous DSAs.3 In particular, the DSA includes Federal government debt, the central bank’s debt to the IMF and two bilateral creditors, guaranteed nonfinancial public enterprises’ debt, and non-guaranteed debt of Ethio-Telecom, a major telecommunication company. 4 External debt is defined according to the residency principle. Notwithstanding the comprehensive coverage, staff assumes a larger contingent liability shock of 4.5 percent of GDP than the default level of 2 percent of GDP, to account for additional risks associated with large state-owned enterprises (SOEs). Financial market shock is assumed at 5 percent of GDP, the default level. 2. The coverage of debt statistics is comprehensive. The authorities publish domestic and external debt statistics of the Federal government and SOEs on a quarterly basis. 5 Debt reporting continues to improve under the World Bank’s Growth and Competitiveness Programmatic Development Policy Operation series, with expanded coverage of SOE domestic debt in the quarterly debt reports and the publication of an annual debt report. 6 3 The coverage differs from the official public debt data in two aspects: the DSA does not include Ethiopian Airlines but includes the deposits of two bilateral creditors at the central bank, as these deposits have the economic characteristics of debt (interest rate and a regular debt-service schedule until maturity, and that a public entity is responsible for servicing these debts) and meeting balance of payment needs. 4 Ethiopian Airlines and Ethio Telecom are the only state-owned enterprises with non-guaranteed debt. Ethio Telecom's debt service payments are added to revenue as a proxy for the company’s net income in the calculation of external debt service to revenue ratio as total operating profit is larger than the debt payments. The inclusion of Ethio Telecom debt service is a conservative estimate of its larger operating profit. 5 Debt bulletins are available on the Ministry of Finance website (https://www.mofed.gov.et/resources/bulletin/). 6 Further information about the transparency of Ethiopia’s debt reporting practices, including changes over time, can be found on the World Bank’s Debt Reporting Heatmap (https://www.worldbank.org/en/topic/debt/brief/debt-transparency-report). 2 >>> Public debt coverage Sub-sectors covered 1 Central government X 2 State and local government X 3 Other elements in the general government 4 o/w: Social security fund 5 o/w: Extra budgetary funds (EBFs) 6 Guarantees (to other entities in the public and private sector, including to SOEs) X 7 Central bank (borrowed on behalf of the government) X 8 Non-guaranteed SOE debt X 3. Ethiopia’s total public and publicly guaranteed debt as a share of GDP declined by about 14 percentage points between 2021/22 and 2023/24. Total public and publicly guaranteed (PPG) debt stood at 34.4 percent of GDP at end-June 2024, down from 40.2 percent of GDP a year before and 48.9 percent of GDP at the end of 2021/22. This decline mainly reflected low external disbursements combined with high nominal GDP growth, with the external debt-to-GDP ratio declining by about 9 percentage points. The domestic debt-to-GDP ratio also declined, rising less than nominal GDP. Debt owed by the Federal government and the central bank accounted for 78 and 6 percent of the total PPG debt stock, respectively, with the remainder owed by SOEs (16 percent). 3 >>> 4. External debt accounted for 44 percent of total PPG debt as of end-June 2024. In 2023/24, PPG external debt amounted to 15.1 percent of GDP, down from 18.1 percent of GDP a year before. The decline mainly reflected lower disbursements to the Federal government, as official bilateral and market external creditors have mostly halted disbursements in response to Ethiopia’s ongoing debt treatment under the G20 Common Framework (CF) and debt service standstill. The Federal government accounts for about 66 percent of total external debt, predominantly to the World Bank and other official creditors. For the SOEs included in the DSA, the PPG external debt ratio fell for the sixth successive year. This decline is due largely to active measures taken by the authorities to contain SOEs’ external borrowing, including no new contracting of non - concessional external debt, consistent both with the International Development Association’s Sustainable Development Financing Policy and a continuous performance criterion under the 2019 ECF-EFF program. • The bulk of external debt is debt to official creditors. 7 IDA and official non-Paris club creditors accounted for about 39 and 33 percent of PPG external debt, respectively. Non-official creditors accounted for 10 percent of PPG external debt, including a US$1 billion Eurobond maturing in December 2024 and SOE debt backed by China’s export credit agency, which was classified as debt to official creditors under the previous DSA. • IDA financing provided positive net transfers of US$1.5 billion in 2023/24, from US$1.7 billion and US$1.1 billion in 2022/23 and 2021/22, respectively. Approved arrangements amounted to US$3.2 billion in 2023/24 (see WB website). • The IMF Executive Board approved a blended ECF–EFF arrangement of SDR 2.1049 billion (700 percent of quota)8 in December 2019, of which Ethiopia drew down SDR 223.85 million. In addition, following the COVID-19 shock, emergency financing was provided through a Rapid Financing Instrument for SDR 300.7 million (100 percent of quota or 0.4 percent of GDP) in April 2020. Debt service relief of obligations under the Catastrophe Containment and Relief Trust was provided until April 13, 2022 (about SDR 14 million). 7 Ethiopia has pre-HIPC arrears to Libya, Russia, and the former Yugoslavia, totaling about US$525 million as of end-June 2024, which are deemed away. Furthermore, there are about US$32 million worth of external arrears to commercial creditors from the former Czechoslovakia, India, Italy, Bulgaria and the former Yugoslavia, all pre-dating the 1990s, which the authorities are also making good faith efforts to resolve. 8 Total access under the 2019 ECF-EFF arrangements were modified to 650 percent of quota via a reduction in the EFF access at the time of the Rapid Financing Instrument approval in April 2020 to comply with applicable policies on annual access limits. At the time of program approval in December 2019, PRGT access was subject to a hard cap of 300 percent of quota (which was removed in July 2021), hence the need for blending with GRA resources. 4 >>> Debt stock 1/ Debt Service 2/ (as of end-June 2024) 2024/25 2025/26 2026/27 2024/25 2025/26 2026/27 In US$ In percent of In percent of In US$ million In percent of GDP million total GDP Total 70,486 100.0 34.4 5,497 5,855 6,117 4.2 4.1 3.7 o/w Federal government 55,019 78.1 26.8 4,396 4,266 4,323 3.3 3.0 2.6 External 30,842 43.8 15.0 2,969 2,248 2,399 2.3 1.6 1.5 International financial institutions 15,554 22.1 7.6 708 567 607 0.5 0.4 0.4 IMF 482 0.7 0.2 229 59 58 0.2 0.0 0.0 World Bank 12,090 17.2 5.9 379 401 437 0.3 0.3 0.3 AfDB/AfDF 2,208 3.1 1.1 56 60 65 0.0 0.0 0.0 Others 774 1.1 0.4 45 46 47 0.0 0.0 0.0 o/w IFAD 430 0.6 0.2 13 15 16 0.0 0.0 0.0 Bilateral official creditors 3/ 4/ 12,236 17.4 6.0 761 1,335 1,310 0.6 0.9 0.8 Paris Club 1,925 2.7 0.9 177 191 190 0.1 0.1 0.1 o/w Italy 531 0.8 0.3 73 75 69 0.1 0.1 0.0 o/w Korea 366 0.5 0.2 0 0 1 0.0 0.0 0.0 Non-Paris Club 10,311 14.6 5.0 584 682 1,065 0.4 0.5 0.6 o/w China 5,175 7.3 2.5 335 632 603 0.3 0.4 0.4 o/w UAE 3,009 4.3 1.5 48 95 93 0.0 0.1 0.1 Bonds 1,066 1.5 0.5 1,099 0 0 0.8 0.0 0.0 Commercial creditors 4/ 5/ 1,986 2.8 1.0 401 346 482 0.3 0.2 0.3 Domestic 39,644 56.2 19.3 2,527 3,606 3,719 1.9 2.5 2.3 Held by residents, total 39,644 56.2 19.3 2,527 3,606 3,719 1.9 2.5 2.3 T-bills 6/ 7,811 11.1 3.8 … … … Commercial banks 2,883 4.1 1.4 … … … Non-bank financial institutions 4,929 7.0 2.4 … … … Bonds 7/ 12,866 18.3 6.3 … … … Central bank 7,563 10.7 3.7 … … … Loans 8,815 12.5 4.3 … … … Central bank direct advance 4,221 6.0 2.1 … … … Commercial banks 4,594 6.5 2.2 … … … Transferred to LAMC 10,152 14.4 5.0 Held by nonresidents, total 0 0.0 0.0 … … … Memo Items: Collateralized debt 8/ 0 … … … … … Contingent liabilities 9/ 0 … … … … … Nominal GDP (US dollar, end of period) 205,004 … … … … … Sources: Ethiopian authorities; and IMF staff estimates and projections. 1/ Consistent with the DSA coverage and may differ from official debt statistics on external debt. 2/ Includes roll-over of T-bills. 3/ Includes loans backed by export credit agencies. 4/ Includes pre-HIPC arrears waiting to receive HIPC comparable treatment. 5/ Loans from commercial banks and credit suppliers non-backed by ECAs and loans backed by China export credit agency. 6/ Marketable T-bills issued under auctions since December 2019. 7/ Includes previously issued short-term debt (direct advance and T-bills) that were converted into bonds. 8/ No collateralized debt is reported. 9/ No significant contingent liabilities have been identified, with the debt perimeter comprehensive encompassing non-guaranteed SOEs debt. • Ethiopia also received debt service relief via the G20 Debt Service Suspension Initiative (DSSI), for about US$220 million over May 2020 –June 2021. Ethiopia did not seek debt relief under the July – December 2021 phase of the DSSI. • Principal repayments of bilateral deposits at the National Bank of Ethiopia (NBE) were reprofiled in 2020/21, for total relief during 2022/23–2025/26 estimated at US$1.3 billion. The authorities have confirmed that there is no collateralized debt outstanding. 5 >>> 5. The authorities requested debt treatment under the CF in February 2021 and the Official Creditor Committee (OCC) was formed in September 2021. The request was to strengthen debt sustainability and improve the risk of debt distress rating to moderate by the end of the 2019 ECF-EFF arrangements, consistent with the Fund’s exceptional access criteria. This requirement will remain under the current Fund-supported program. Eleven OCC meetings have already taken place, with the last one held in December 2024. 6. A standstill agreement was reached with official creditors in November 2023, suspending debt service due in 2023 and 2024. The debt service suspension is retroactive to January 1, 2023, and therefore resolves official arrears that had accumulated earlier. Ethiopia defaulted on its Eurobond obligations by missing coupon payments totaling US$66 million in December 2023 and June 2024. The authorities have begun restructuring negotiations with bondholders. 7. The domestic debt to GDP ratio declined to 19.3 percent of GDP at end-June 2024. With SOE debt transferred to the Liability and Asset Management Corporation (LAMC) classified as government debt (5 percent of GDP at end-June 2024), the Federal government accounted for 87 percent of total domestic debt. Meanwhile SOE domestic debt fell from 13 in 2020/21 to 2.4 percent of GDP to end-June 2024. • Around one third of the Federal government’s domestic debt is legacy debt issued at well below market rates, including a long-term bond resulting from the conversion of past direct advances from the NBE, and debt issued for purposes of bank recapitalization. With scarce external financing, the government continued to rely mainly on domestic borrowing in 2023/24 through direct advances from the NBE and issuance of Treasury bills (T-bills). • Treasury bill auctions began in December 2019 at the time of the approval of the ECF-EFF arrangements. As of end-June 2024, the stock of T-bills stood at 3.8 percent of GDP down from 3.9 percent of GDP at end-June 2023. The weighted average yield, though still negative in real terms, has gone up (9–11 percent in 2023/24 from 1−2 percent offered on non-market instruments in the past). The stock of advances from the NBE increased to 2.1 percent of GDP at end-June 2024 from 1.5 percent of GDP at end-June 2023. The authorities reintroduced some financial repression measures, including mandatory commercial bank purchases of bonds issued by the Development Bank of Ethiopia (August 2021) and of non-marketable 5-year government bonds (November 2022). • Domestic SOE debt is highly concentrated. At end-June 2024, the Commercial Bank of Ethiopia (CBE), a large public sector bank, held virtually all SOE domestic debt including debt that was transferred to LAMC. More than 90 percent of this debt was owed by three troubled SOEs that were 6 >>> not regularly servicing their loans, which were publicly guaranteed. These loans were being systematically renewed and guarantees were not made effective. • The authorities established LAMC to manage the SOEs’ debt burden. In August 2021, SOE domestic debt of nearly ETB 400 billion (9.4 percent of GDP) was transferred to LAMC, classified by staff as an extra-budgetary government agency, which in turn made repayments to the CBE using the local currency proceeds from the first telecom license auction held in late fiscal year 2020/21 (US$850 million). Debt transferred to LAMC is treated as government debt. Outstanding debt carried by the agency increased to ETB 582 billion as of end-June 2024, from ETB 540 billion as of end-June 2023, as arrears on interest payments were capitalized. • Domestic debt service costs are expected to rise over the medium term. As the authorities continue to develop domestic debt markets and reduce financial repression, domestic financing costs are expected to rise, while providing a more reliable source of financing. The steep rise in the domestic debt service to revenue ratio (Figure 6) is partially explained by the authorities’ commitment to reach positive real monetary policy rates by March 2025 and to rely on market-based financing (primarily short-term instruments in the near future). Interest rates are expected to moderate over time as declining inflation results in lower nominal yields, while bond market development will allow for a higher proportion of borrowing at medium- and long-term maturities. In the near term, higher-than- forecast increases in funding costs and difficulties in rollover are risks. An increase in revenue mobilization, supported by tax policy measures, will reduce these risks, and help stabilize the debt service to revenue ratio. • Domestic debt markets will continue to deepen. The IMF-World Bank assessed the stage of development of the local currency bond market in October 2023 and have proposed a reform plan to the authorities. The key stakeholders are due to agree next steps to begin the implementation of this reform plan in coming weeks with the support of IMF-WB TA. It is expected that the money market and primary market will be the focus of the initial reform agenda. Possible concrete steps, accompanied by a move towards market determined interest rates, include improving the issuance planning process and establishing the medium-term debt strategy. The DSA builds on the macroeconomic trajectory envisaged under the Fund-supported program that was approved in July 2024. This involves a full transition to market-determined exchange rate with positive effects on the current account and FDI, as well as a revenue-driven fiscal consolidation with safeguards on pro-poor spending. The transition to a flexible exchange rate regime has advanced well. The official exchange rate more than doubled since the reform, and there has been a significant narrowing of the parallel market premium, which has stabilized in single digits. FX availability has improved, with no evidence of a macroeconomically significant backlog in FX demand. Bid-offer spreads have narrowed, and an interbank FX market has begun to operate, with growing volumes. 8. The near-term outlook is challenging (Text Table 3). • Growth has moderated but has held up overall. Average growth has fallen to 6.8 percent during 2019/20–2023/24 from over 9 percent per year in the decade to 2018/19 and was 8.1 percent for 7 >>> 2023/24. Favorable rainfall and expansion of irrigated crop-production have supported agricultural output, while uptick in electricity and mining bolstered industry sector growth. o Growth in 2024/25 is projected at 6.6 percent, with potential uncertainties linked to the transition to market-determined exchange rate offset by improving agricultural conditions and the easing of import shortages. Over the medium term, the competitiveness and allocative efficiency gains from exchange rate unification (reduction in policy uncertainty, correction of overvaluation, and better FX availability) and stronger policy framework (higher spending financed with domestic revenues and concessional external financing and a stable monetary policy framework with positive real interest rates) will support trend growth of 7.5–8 percent. o Between 2025/26–2033/34, average real GDP growth is projected at 7.3 percent, slower than historical rates of around 10 percent per annum over the two decades prior to 2019. The long-term projection reflects demographic factors (the median age is below 20 years) and expected productivity gains, including from reforms and economic transformation. • Inflation has been relatively stable at high levels, with disinflation expected to gather pace in the medium term. The authorities are adopting an interest-rate based monetary policy framework, with low and stable inflation as the policy objective. Inflation declined moderately in 2023/24, with non-food inflation declining in response to fiscal and monetary tightening. Inflation has been below expectations in the first four months of 2024/25. Headline inflation fell to 17 percent in November from 18-19 percent in September and October, with food and non-food inflation declining. The impact of the exchange rate reform on inflation has so far remained contained. Gradual adjustment of key administered prices (fuel, fertilizers, electricity), price stabilization measures (food, medicines) have helped contain price increases. o Inflation is expected to peak around 25 percent in mid to late-2025 reflecting the full impact of the FX passthrough, and to reach single digits by 2028. The total impact of the passthrough on inflation has been and is expected to remain limited due to the low share of imports that were occurring at the official exchange rate in private consumption expenditure and evidence that price formation using the parallel market exchange rate is consistent with international prices. Tightening monetary policy by eliminating monetary financing and moving to positive real interest rates will help contain the second-round impact on inflation. Measures to mitigate the impact of price adjustments of essential imports (fuel, fertilizer, and medicines) will smooth the impact of exchange rate changes. • The current account deficit is expected to increase in the near term, before narrowing in the medium term. The move to market-clearing exchange rate in 2024/25 and international financial support are expected to alleviate FX shortages and help rebuild international reserves from low levels. The current account deficit is expected to rise at first before settling at around 2.1 percent of GDP in 2027/28. o Imports of goods are forecast to increase from 8.8 percent of GDP in 2023/24 to 14.5 percent of GDP in 2024/25 due to FX shortages becoming less acute. As pent-up import demand is gradually cleared, imports of goods are expected to ease to 12.8 percent of GDP in 2027/28. As price and 8 >>> substitution effects weigh more, imports are expected to decline as a proportion of GDP. Imports have reacted relatively slowly to the exchange rate unification as a significant part of transactions were already completed at the parallel rate, while transactions that were completed at the official rate were for essential goods with relatively inelastic demand. Materialization of the pent-up demand and higher project financing from external creditors would both contribute to the rise in the goods imports-to-GDP ratio. o Goods exports are forecast to increase from 1.8 to 3.5 percent of GDP between 2023/24 and 2024/25. Actual export performance in 2023/24 was somewhat stronger than projected in the previous DSA. Trade data for Q1 2024/25 suggests an initial substitution effect response to FX reform including in gold and coffee exports. Exports of goods in Q1 2024/25 registered an 81 percent year-on-year increase, supported by a six-fold increase in gold exports and a 47.8 percent increase in coffee exports. The increase in gold exports reflects production moving to official from informal export channels in response to improved price incentives. The increase in coffee exports is mainly due to inventory sales and a shift from the domestic to export markets following exchange rate reform. Goods and services exports are assumed to remain around 10 percent of GDP over the medium term after near doubling from 5.6 percent of GDP in 2023/24 to 9.6 percent in 2024/25, given Ethiopian Airlines strong prospects and expected positive effects from the exchange rate unification such as the diversification of export products and destinations. Considering the high GDP deflator, this is mirrored in nearly a doubling of exports in US$ over the medium term. As continued growth will require new investment, and previous projections already include a substantial increase in exports, medium-term projections are unchanged. o Private transfers (remittances and NGO transfers) are expected to recover to historical levels of about 5 percent of GDP, reacting positively to the exchange rate reform, paired with the removal of current account restrictions, which would reduce uncertainty and costs, incentives for informal transfers, and fears associated with the imposition of restrictions. Remittances in Q1 2024/25 increased by 26 percent year-on-year. • Foreign direct investment (FDI) is projected to recover as FX reforms take hold. The proceeds from the partial privatization of Ethio Telecom, the auction of the second telecom license as well as potential privatization of 8 sugar factories are assumed to lead to inflows of US$650 million in 2025/26. Moreover, the DSA does not include future telecom investments from private foreign companies, which the authorities estimate could add around US$8 billion in additional foreign investment over the next 10 years. Over the medium term, FDI is expected to settle at around 3.0 percent of GDP, consistent with pre-COVID trends. • Revenue mobilization will anchor debt sustainability while safeguarding humanitarian and pro-poor spending. The general government primary deficit is expected to narrow from 1.4 percent of GDP in 2023/24 to 0.7 percent of GDP in 2027/28, having already declined from a peak of 3.5 in 2021/22. Consolidation will be driven by tax revenue measures, while pro-poor spending will increase, and capital expenditure will partially recover to meet reconstruction needs. 9 >>> 9. The main risks to the outlook stem from domestic policy slippages, potential social discontent, and security challenges. Reform fatigue due to political and social pressures, could lead to delay in or reversal of policy measures. Macroeconomic conditions could threaten social stability through continued shortages or further increases in prices for essential goods, or by an expectations-led inflation- depreciation spiral arising from exchange rate reforms. Recurrent volatility in global commodity prices also poses a risk to the outlook, as do potential delays in the debt restructuring process. Deterioration in the domestic security situation could renew economic disruption and derail international support. Intensifying spillovers from regional conflicts also pose downside risks to the outlook. There is also upside potential if security conditions continue to improve, strengthening the economic recovery and unlocking investment . Fiscal year ending June 2024/25 2025/26 2026/27 2027/28 2028/29 Average (2029/30- 2043/44) Real GDP Growth (annual percent change) Current DSA 6.6 7.1 7.7 8.0 7.8 6.2 2024 July ECF approval DSA 6.5 7.1 7.7 8.0 7.8 6.2 Current Account Balance (percent of GDP) Current DSA -4.4 -3.0 -2.5 -2.1 -2.1 -2.3 2024 July ECF approval DSA -4.3 -3.2 -2.5 -2.0 -1.9 -2.3 Exports of goods and services (percent of GDP) Current DSA 9.6 9.9 10.0 10.2 10.0 9.3 2024 July ECF approval DSA 8.9 9.6 10.0 10.4 9.9 9.3 Exports of goods and services (annual percent change) Current DSA 7.7 12.6 16.5 16.3 9.7 10.6 2024 July ECF approval DSA 7.9 15.0 17.3 17.0 7.1 9.4 Fiscal balance, including grants (percent of GDP) Current DSA -1.7 -2.0 -1.9 -1.8 -1.6 -1.6 2024 July ECF approval DSA -1.7 -2.1 -2.0 -2.0 -2.0 -2.0 International reserves (billions of U.S. dollars) Current DSA 3.1 5.3 7.3 10.4 11.7 21.8 2024 July ECF approval DSA 2.8 5.1 7.0 10.2 11.5 20.9 General government revenue (percent of GDP) Current DSA 8.5 9.8 10.8 11.2 11.4 11.8 2024 July ECF approval DSA 8.3 9.8 10.8 11.2 11.4 12.0 Grant element of new external borrowing Current DSA 35.1 43.5 41.3 31.5 48.3 51.4 2024 July ECF approval DSA 34.4 44.0 41.2 31.5 48.3 51.4 Nonconcessional debt disbursements (billions of U.S. dollars) Current DSA 0.05 0.20 0.27 0.30 0.09 0.00 2024 July ECF approval DSA 0.05 0.20 0.27 0.30 0.09 0.00 Source: IMF staff projections. 10. The fiscal adjustment is driven by tax policy measures, the recovery of the tax base from recent shocks and by continued restraint of SOE borrowing. The DSA realism tools do not indicate that the projected fiscal adjustment is unrealistic, with the primary balance adjustment below the top quartile of the historical distribution of comparator countries. Furthermore, the risk that the adjustment proves infeasible is mitigated by the specific measures under the program to raise revenues, including (i) the broadening of the excise tax base and switching to a specific excise tax system with higher rates on 10 >>> alcohol, tobacco, and fuels; (ii) removal of VAT exemptions; (iii) introduction of a motor vehicle circulation tax; and (iv) recovery of the tax base from the historical lows reached during the pandemic and conflict. The program envisages a limit on domestic bank borrowing by SOEs to supplement the zero limit on non- concessional external borrowing and reforms to the electricity tariff framework with a view to further reducing the total SOE debt to GDP ratio. Lower investment and a diminished growth contribution from public investment than expected in the previous DSA are mitigated by a pick-up in productivity through more efficient resource allocation as FX rationing and market distortions stemming from the exchange rate ease, and by the increase in spending on education, health, and social safety net (Figures 3 and 4). 11. Program-supported reforms reducing financial repression and exchange rate distortions underpin a consolidation of quasi fiscal activity and increase fiscal transparency. Moving to positive real interest rates and phasing out of mandatory purchase by banks of Treasury and Development Bank of Ethiopia bonds at sub-market interest rates will eliminate subsidized lending to SOEs and government from captive domestic savers. Recapitalizing CBE with government securities enables writing off CBE’s claims on LAMC and provisioning of non-performing exposures to SOEs recognizes historic costs of subsidized lending to SOEs on-budget. Eliminating real exchange rate overvaluation lifts the implicit tax on exporters previously obliged to surrender FX at a below market exchange rate as well as the implicit subsidy to fuel and fertilizers which were imported at the favorable official rate. Subsidies are brought on- budget, and the impacts of the reforms managed through targeted cash transfers to vulnerable groups. 12. World Bank supported reforms complement and reinforce program support. The focus of World Bank policy engagements through its Development Policy Operations, projects, and through the Sustainable Development Financing Policy (SDFP) reinforce areas of the IMF-supported program. Relevant areas of reform engagement and this DSA include the strengthening of the financial sector (with a focus on the Commercial Bank of Ethiopia); improving fiscal and SOE financial transparency and reporting; revenue mobilization; and broader structural reforms to improve the growth and export environment. 13. This DSA makes the following assumptions on external and domestic financing and debt servicing: • New debt projections add to debt outstanding as of end-June 2024. All bilateral sovereign deposits at NBE including the recent deposits from a non-OCC country are categorized as debt, as these deposits have been used to meet BOP needs, and in line with the treatment in the past. No contracting or guaranteeing of new non-concessional external loans is assumed during the duration of the arrangement, with one exception: the authorities have requested an exemption from the zero-limit on non-concessional borrowing for the macro-critical Koysha Hydroelectric Dam project (US$950 million).9 The ECF includes a present value-based indicative target on overall external borrowing that is consistent with the authorities’ borrowing plan and debt sustainability (text table 4). 9 The authorities could not mobilize concessional financing to finalize the Koysha dam project despite sustained efforts. The project is critical for generating export revenues, rural electrification, and meeting climate change policy goals and is already two-thirds complete. 11 >>> • The overall IDA project financing envelope is expected to reach about US$1.8 billion by 2027/28. Most of IDA envelope is assumed to be in loans, consistent with the LIC-DSF guidance that regular credit terms on IDA lending should be assumed in all years for which grant finance has not already been committed. • A revised debt service schedule is used, based on outstanding debt as of end-June 2024 (the new schedule is also reconciled between the authorities’ financial advisors and the OCC secretariat for end-June 2023 stock, and includes the debt service schedule for loan disbursements in 2023/24). This differs from the debt service schedule used in the previous DSA, which included staff’s estimate of the standstill impact. • A residual financing gap of US$10.7 billion during the program period is assumed. Reserve adequacy would be brought to about 3.5 months of import coverage by the end of the program. The Fund would contribute about a third of resources to fill the gap. Besides IMF financing, the remaining gap is assumed to be financed by US$3.75 billion of budget support from the World Bank and debt relief from the OCC, proxied by the issuance of a net present value neutral bond. The World Bank disbursed US$1.5 billion of budget support in August 2024. No assumption on the parameters and modality of the needed debt treatment is made. Volume of new debt PV of new debt in 2024/25 PPG external debt in 2024/25 (program purposes) 1 1 USD million Percent USD million Percent By sources of debt financing 4,900 100 2,856 100 Concessional debt, of which2 3,950 81 1,906 67 Multilateral debt 3,600 73 1,683 59 Bilateral debt 350 7 224 8 Non-concessional debt, of which2 950 19 950 33 Semi-concessional3 - - - - Commercial terms4 950 19 950 33 1 Contracting and guaranteeing of new debt. The present value of debt is calculated using the terms of individual loans and applying the 5 percent program discount rate 2 Debt with a grant element that exceeds a minimum threshold. This minimum is typically 35 percent, but could be established at a higher level. 3 Debt with a positive grant element which does not meet the minimum grant element. 4 Debt without a positive grant element. For commercial debt, the present value would be defined as the nominal/face value. • For domestic debt, the program balances phasing out of non-market-based financing of the public sector and maintaining fiscal sustainability: o In July 2024, the authorities issued 899 billion Birr of 13-year government securities to write off all CBE claims on LAMC (580 billion birr) and fully provision nonperforming SOE exposures (263 billion birr) and bring CBE’s capital adequacy ratio to the regulatory minimum (54 billion) . This has no material impact on domestic debt level since CBE’s claims on LAMC and SOEs were already part of domestic PPG debt in the DSA. 12 >>> o Monetary financing of fiscal deficits has been eliminated starting in FY2024/25. o The mandatory purchase of 5-year treasury bonds at sub-market interest rates by commercial banks will be phased out by end-June 2025, with an intention to develop the market for longer- dated government securities. o The requirement that financial institutions purchase DBE bonds will be removed before the fifth review of the Fund program. o A voluntary exchange of the current stock of T-bills held by Public Servants Social Security Agency and the Private Organizations Employees’ Social Security Administration for 13-year securities was conducted in July 2024. The exchange provides debt service relief to the Treasury and an instrument that better matches the pension funds’ asset and liability durations . o Direct advances from the NBE totaling 242 billion Birr at end-June 2024 have been converted into a long-term bond with a maturity of 25 years and an interest rate of 3 percent. • In future, domestic financing needs will be covered by market-oriented instruments. The government’s net domestic financing is projected to shift predominantly to T-bills with market- determined interest rates, while SOEs are assumed to issue medium to long-term bonds. Interest rates will rise to positive levels in real terms over the medium term, consistent with the phasing out of financial repression under an interest rate-based monetary policy framework. Before the transition to fully market-based instruments is complete, the lower costs associated with legacy domestic debt instruments paying sub-market interest rates and the pension funds’ voluntary conversion of short-term debts into longer-term bonds provides significant real debt service relief to the government. 14. Ethiopia’s debt carrying capacity is weak, due fundamentally to the decline in FX reserves. The Composite Indicator (CI)—based on the IMF World Economic Outlook projections in October 2024 and the World Bank’s 2023 Country Policy and Institutional Assessment (CPIA) score that was published in July 2024—stands at 2.47, which corresponds to a weak signal. Ethiopia’s debt carrying capacity was 13 >>> downgraded to “weak” in October 2022 after two consecutive weak signals driven by low FX reserves and a slight decline in CPIA. 15. Public and publicly guaranteed (PPG) external debt is expected to decline over the projection period, but three indicators consistently breach their indicative thresholds. The debt service-to-revenue ratio and the two exports-linked external debt ratios present protracted breaches, reflecting two main factors: (i) high and bunched debt service from SOE investment projects and repayment of the US$1 billion Eurobond in December 2024; and (ii) the low level of exports. Finally, the PV of debt-to GDP ratio remains well below its indicative threshold for the entire projection period (Figure 1). 16. The standard stress tests highlight vulnerabilities to export shocks. Adverse shocks to exports would exacerbate external debt servicing pressures and difficulties in financing external and domestic needs (Figure 1). In the case of the two exports related indicators that consistently breach the thresholds, the breaches become larger. Implementation of FX reforms, building FX reserves, and materialization of upside risks to exports from a better-than-expected response to reforms or the impact of faster global growth, would help strengthen external debt sustainability. The debt service-to-revenue ratio experiences larger and persistent breaches under a one-time exchange rate depreciation shock, which points to risks of devoting significant amount of revenue to external debt service at the expense of cutting priority spending under a sharp depreciation scenario. 17. Indicators of market financing risks remain elevated. The EMBI spread is at distressed levels, well beyond the LIC-DSF benchmark of 570 basis points. The relatively contained external financing needs lead to a moderate rating for market financing risks under the LIC DSF. A return to market access is unrealistic at current spreads and is neither foreseen by the authorities nor necessary to meet external financing needs. Market financing risks are currently assessed as moderate per the mechanical risk rating under the LIC DSF (below the LIC DSF benchmark of 14 percent of GDP for signaling market-financing pressures) (Figure 5). Gradual consolidation of the public sector including SOEs, along with deepening of financial markets through the opening of banking sector to foreign investors and the growth of pension funds, can mitigate domestic financing pressures. 18. The present value of overall public debt/GDP ratio is projected to steadily decline, with breaches only in 2024/25. As public sector consolidation takes hold and the external debt situation improves with continued restraint on borrowing, the PV of public debt/GDP ratio will stay below the applicable threshold throughout the projection period (with a one-off breach discounted). Gross financing 14 >>> needs are projected to average around 6 percent of GDP during the program period through 2027/28 (below the LIC-DSF benchmark of 14 percent of GDP) and stabilize at around 9 percent of GDP by 2033/34. This need is expected to revert to normal levels, alongside an anticipated increase in the real cost of new domestic borrowing over the medium to long term. Should downside risks of public sector balances lead to larger fiscal needs in the near term, the authorities’ commitment to consolidation during the Fund-supported program would help contain the risks to public debt. The PV of public debt-to-revenue also remains on a downward trend. Components Coefficients (A) 10-year average values CI Score components Contribution of (B) (A*B) = (C) components CPIA 0.385 3.260 1.26 51% Real growth rate (in percent) 2.719 7.032 0.19 8% Import coverage of reserves (in percent) 4.052 15.766 0.64 26% Import coverage of reserves^2 (in percent) -3.990 2.486 -0.10 -4% Remittances (in percent) 2.022 4.250 0.09 3% World economic growth (in percent) 13.520 2.967 0.40 16% CI Score 2.473 100% CI rating Weak New framework Cut-off values Weak CI < 2.69 Medium 2.69 ≤ CI ≤ 3.05 Strong CI > 3.05 APPLICABLE APPLICABLE EXTERNAL debt burden thresholds TOTAL public debt benchmark PV of total public debt in PV of debt in % of percent of GDP 35 Exports 140 GDP 30 Debt service in % of Exports 10 Revenue 14 19. Overall public debt is susceptible to the materialization of contingent liabilities. The PV debt/GDP ratio rises to 42 percent in 2025/26 under combined contingent liabilities shock but remains below the threshold from 2027/28 onwards. 20. Risks from Ethiopian Airlines appear negligible in the near term The airline, which is excluded from the DSA, adjusted well to the COVID shock with support from a strong balance sheet at the beginning 15 >>> of the crisis and active measures, including changes in business focus to cargo. This operational shift allowed the company to achieve record profitability. The authorities have conveyed that Ethiopian Airlines does not intend to seek government support. 21. Ethiopia’s debt is assessed to be unsustainable, mainly due to protracted breaches of exports-related external debt indicators. Following a missed Eurobond interest payment in December 2023, the country is in debt distress. 22. Successful completion of debt treatment and implementation of the reform agenda would restore debt sustainability and allow exit from debt distress. Ethiopia’s DCC is classified as weak, because of low reserves and recent modest declines in the CPIA. In relation to the debt thresholds for weak DCC, there are protracted breaches of the two exports-related indicators and of the debt service to revenue ratio, indicating both liquidity and solvency pressures. The PV of external debt to GDP ratio remains below the threshold for the entire projection period in both the baseline and the most extreme shock scenario. All remaining external debt burden indicators exceed their thresholds for a protracted period under both the baseline and the most extreme shock scenario, with stress tests indicating vulnerabilities to export and depreciation shocks. The combination of prudent macroeconomic policies, including a move to market clearing exchange rate and export diversification, fiscal and debt conditionality, improved SOE governance, and the debt treatment would all contribute towards reducing debt vulnerabilities. A drawn-out debt restructuring process would however slow the reduction in debt vulnerabilities. 23. An external debt treatment is needed for Ethiopia to close financing gaps over the program period and to help achieve a moderate risk of debt distress by the end of the requested Fund-supported program. To close the BOP financing gap, required debt relief during the program period (2024/25–2027/28) amounts to about US$3.5 billion. To bring Ethiopia’s risk of debt distress to “moderate” over the medium term, debt relief would need to bring the three binding external debt burden indicators below the thresholds (140 for PV of debt-to-exports ratio, 10 for debt service-to-exports ratio and 14 for debt service to revenue) by the end of the program period and remain so over the DSA projection horizon. 24. The OCC provided financing assurances for a debt treatment consistent with the IMF- supported program and is on track to reach agreement with the authorities on a term sheet for debt treatment by the second review. The authorities made a formal debt treatment proposal to the OCC on October 16, 2024. The co-chairs offered the authorities reassurance on October 23 that “sufficient progress towards an agreement in principle by the time of the second review” is being mad e. An OCC meeting took place on December 4 to review the debt treatment perimeter, the cut-off date and the authorities’ request for an extension of debt service standstill until the Memorandum of Understanding (MOU) on debt treatment is signed. Further meetings on proposed terms are expected later in December 2024. The authorities have also taken important steps towards discussing debt restructuring on comparable terms with private creditors. Following a Global Investor Call on October 1, 2024, which provided an update on recent economic developments and included an illustrative debt treatment option, the authorities met the 16 >>> Eurobond creditor committee (representing more than 40 percent of principal) during the IMF/WB Annual Meetings. 25. The post-restructuring DSA incorporating the authorities’ illustrative debt treatment proposed to the OCC indicates that the debt vulnerability rating is expected to improve to moderate risk of debt distress by the end of program (July 2028). In the illustrative scenario, all indicators fall under the thresholds starting in 2027/28 (2028 in the figure below). The PV of debt-to-exports and the debt service to export ratios reach the thresholds in the last year of the program, with no “buffer”, r eflecting balanced risks to the macroeconomic outlook, while indicators in the baseline remain comfortably below thresholds in the post-program period. The OCC secretariat is preparing debt restructuring options, including the authorities’ proposal. Following the supp lement to the 2018 guidance note on the LIC-DSF, the official sector debt treatment will be only incorporated in the baseline after a memorandum of understanding is agreed by the OCC and the authorities. 26. The authorities broadly agreed with the overall assessment of the country’s debt sustainability. Debt sustainability is expected to be restored through a debt restructuring, development partner support, and the reforms contemplated under the Fund-supported program. The authorities are committed to further improve debt management. 17 >>> . PV of Debt-to-GDP Ratio PV of Debt-to-Export Ratio ## PVof PV ofdebt-to debt-to GDP GDP ratio ratio PV PV of of debt-to-exports debt-to-exports ratio ratio 35 250 35 250 30 # 30 # 200 200 25 25 20 150 20 150 15 15 100 100 10 10 50 5 50 5 Most extreme shock: One-time depreciation Most extreme shock: One-time depreciation Most extreme shock: Exports 0 0 Most extreme shock: Exports 0 0 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 Debt Debt Service-to-Exports service-to-exports ratio Ratio Debt service-to-exports ratio Debt Service-to-Revenue Debt service-to-revenueRatio ratio 18 Debt service-to-revenue ratio 18 25 16 25 16 14 20 14 20 12 12 10 15 10 15 8 8 10 6 6 10 4 4 5 2 5 Most extreme shock: Exports Most extreme shock: One-time depreciation 2 0 Most extreme shock: Exports Most extreme shock: One-time depreciation 0 0 2025 2027 2029 2031 2033 2035 0 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 Baseline Historical scenario Most extreme shock 1/ Threshold Baseline Historical scenario Most extreme shock 1/ Threshold 18 >>> Actual Projections Average 8/ 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 2044 Historical Projections External debt (nominal) 1/ 25.8 19.5 16.1 31.3 27.9 25.2 22.9 19.8 17.2 9.3 4.5 27.9 18.6 Definition of external/domestic debt Residency-based of which: public and publicly guaranteed (PPG) 24.0 18.1 15.1 29.3 26.2 24.0 21.9 19.1 16.7 9.3 4.5 25.6 17.9 Is there a material difference between the No two criteria? Change in external debt -5.6 -6.3 -3.4 15.2 -3.4 -2.7 -2.3 -3.0 -2.6 -1.2 -0.4 Identified net debt-creating flows -2.4 -5.1 -3.3 -1.5 -2.3 -2.2 -2.6 -2.6 -2.0 -0.7 -0.7 -1.0 -1.7 Non-interest current account deficit 3.6 2.5 2.7 3.0 2.4 2.0 1.6 1.5 2.0 2.2 1.8 5.1 2.2 Deficit in balance of goods and services 10.1 7.4 6.2 9.9 8.9 8.1 7.6 7.0 7.2 5.7 4.3 12.6 7.3 Exports 8.2 6.6 5.6 9.6 9.9 10.0 10.2 10.0 9.9 9.2 9.2 Debt Accumulation Imports 18.3 14.0 11.8 19.5 18.8 18.2 17.9 17.0 17.0 14.9 13.5 3.5 60 Net current transfers (negative = inflow) -6.5 -4.8 -3.5 -6.9 -6.5 -6.2 -6.0 -5.5 -5.2 -3.6 -2.5 -7.4 -5.2 of which: official -0.9 -0.7 -0.5 -1.8 -1.1 -1.0 -0.9 -0.8 -0.8 -0.7 -0.7 3.0 Other current account flows (negative = net inflow) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 50 2.5 Net FDI (negative = inflow) -2.6 -2.1 -1.9 -3.4 -3.2 -2.9 -3.0 -3.0 -3.1 -2.5 -2.3 -3.3 -2.9 Endogenous debt dynamics 2/ -3.4 -5.5 -4.1 -1.1 -1.4 -1.3 -1.2 -1.1 -1.0 -0.5 -0.2 2.0 40 Contribution from nominal interest rate 0.5 0.3 0.2 0.6 0.6 0.6 0.5 0.5 0.4 0.1 0.0 Contribution from real GDP growth -1.8 -1.4 -1.2 -1.7 -2.0 -1.9 -1.8 -1.6 -1.3 -0.6 -0.2 1.5 30 Contribution from price and exchange rate changes -2.1 -4.4 -3.1 … … … … … … … … 1.0 Residual 3/ -3.2 -1.3 -0.1 16.7 -1.2 -0.5 0.3 -0.5 -0.6 -0.5 0.4 0.0 1.1 of which: exceptional financing 0.2 0.2 0.0 3.2 1.5 1.0 1.2 0.0 0.0 -0.2 0.0 0.5 20 0.0 Sustainability indicators 10 PV of PPG external debt-to-GDP ratio ... ... 11.5 19.9 19.0 17.1 15.5 13.3 11.5 5.9 2.8 -0.5 PV of PPG external debt-to-exports ratio ... ... 207.4 208.5 192.5 170.6 151.7 133.6 116.9 64.6 30.0 -1.0 0 PPG debt service-to-exports ratio 14.7 11.6 7.9 25.2 16.5 15.4 17.1 16.4 13.5 6.7 2.6 2025 2027 2029 2031 2033 2035 PPG debt service-to-revenue ratio 15.0 9.8 6.0 28.0 16.6 14.3 15.5 14.3 11.6 5.3 2.0 Gross external financing need (Million of U.S. dollars) 3170.6 2275.1 3080.9 3095.6 1675.8 1554.8 1235.2 824.6 1090.8 1721.5 -2539.5 Debt Accumulation Grant-equivalent financing (% of GDP) Key macroeconomic assumptions Grant element of new borrowing (% right scale) Real GDP growth (in percent) 6.4 7.2 8.1 6.6 7.1 7.7 8.0 7.8 7.5 6.5 5.5 7.9 7.2 GDP deflator in US dollar terms (change in percent) 7.1 20.5 18.7 -41.3 2.0 6.1 5.7 4.7 4.4 6.3 3.3 6.1 1.0 Effective interest rate (percent) 4/ 1.7 1.6 1.1 2.5 2.1 2.4 2.5 2.3 2.1 1.5 0.9 1.9 2.0 External debt (nominal) 1/ Growth of exports of G&S (US dollar terms, in percent) 22.8 3.3 8.1 7.7 12.6 16.5 16.3 9.7 11.2 11.9 9.3 6.4 12.0 of which: Private 35 Growth of imports of G&S (US dollar terms, in percent) 24.9 -1.4 7.8 3.7 5.2 10.7 12.2 7.2 12.4 10.2 7.8 5.2 9.4 Grant element of new public sector borrowing (in percent) ... ... ... 35.1 43.5 41.3 31.5 48.3 49.1 50.5 50.7 ... 47.0 30 Government revenues (excluding grants, in percent of GDP) 8.1 7.9 7.3 8.5 9.8 10.8 11.2 11.4 11.5 11.7 12.3 11.1 11.0 Aid flows (in Million of US dollars) 5/ 549.6 602.9 590.2 3893.4 3396.8 3060.8 2800.4 2804.0 2900.2 3584.6 6014.3 25 Grant-equivalent financing (in percent of GDP) 6/ ... ... ... 2.9 1.8 1.4 1.1 0.9 0.8 0.6 0.5 ... 1.1 Grant-equivalent financing (in percent of external financing) 6/ ... ... ... 51.3 53.0 52.2 42.7 64.5 67.1 71.2 79.3 ... 61.9 20 15 Memorandum items: PV of external debt 7/ ... ... 12.6 22.0 20.6 18.4 16.5 14.0 12.1 6.0 2.8 10 In percent of exports ... ... 226.3 229.9 209.3 182.8 161.2 141.1 122.4 65.6 30.2 Total external debt service-to-exports ratio 18.7 14.4 11.4 29.2 20.3 18.7 19.9 18.6 15.4 7.1 2.8 5 PV of PPG external debt (in Million of US dollars) 24195.0 26184.7 27214.4 28105.6 29066.0 28094.0 27315.5 26205.1 28492.7 0 (PVt-PVt-1)/GDPt-1 (in percent) 0.9 0.8 0.6 0.6 -0.5 -0.4 -0.1 0.0 2025 2027 2029 2031 2033 2035 Non-interest current account deficit that stabilizes debt ratio 9.2 8.9 6.1 -12.2 5.8 4.7 3.9 4.6 4.6 3.5 2.2 Sources: Country authorities; and staff estimates and projections. 0 1/ Includes both public and private sector external debt. Presented on fiscal year basis (e.g., 2020 referes to fiscal year ending in June 2020). 2/ Derived as [r - g - ρ(1+g) + Ɛα (1+r)]/(1+g+ρ+gρ) times previous period debt ratio, with r = nominal interest rate; g = real GDP growth rate, ρ = growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock. 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 19 >>> Actual Projections Average 6/ 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 2044 Historical Projections Public sector debt 1/ 48.9 40.2 34.4 45.5 39.8 36.8 34.3 32.2 30.3 23.0 21.0 51.4 31.6 Definition of external/domestic Residency- of which: external debt 24.0 18.1 15.0 29.2 26.2 23.9 21.9 19.1 16.7 9.3 4.5 25.6 17.9 debt based of which: local-currency denominated Change in public sector debt -7.3 -8.7 -5.8 11.2 -5.8 -2.9 -2.5 -2.2 -1.8 -1.2 -0.1 Is there a material difference Identified debt-creating flows -8.1 -10.6 -7.2 -3.8 -3.8 -2.1 -1.8 -1.5 -1.2 -0.6 0.0 -5.0 -1.7 No between the two criteria? Primary deficit 3.7 2.2 1.6 0.7 0.9 1.0 0.9 0.8 0.6 0.3 0.2 2.4 0.7 Revenue and grants 8.5 8.2 7.5 9.9 10.3 11.3 11.7 11.9 12.0 12.0 12.6 11.9 11.5 of which: grants 0.4 0.4 0.3 1.4 0.6 0.5 0.4 0.4 0.4 0.3 0.3 Public sector debt 1/ Primary (noninterest) expenditure 12.3 10.4 9.2 10.7 11.2 12.3 12.6 12.6 12.6 12.3 12.8 14.3 12.2 Automatic debt dynamics -11.9 -12.8 -8.8 -4.9 -4.3 -3.2 -2.8 -2.3 -1.9 -0.9 -0.2 of which: local-currency denominated Contribution from interest rate/growth differential -10.7 -8.9 -6.6 -4.9 -4.3 -3.2 -2.8 -2.3 -1.9 -0.9 -0.2 of which: foreign-currency denominated of which: contribution from average real interest rate -7.4 -5.6 -3.6 -2.7 -1.3 -0.3 -0.1 0.2 0.4 0.6 0.9 of which: contribution from real GDP growth -3.4 -3.3 -3.0 -2.1 -3.0 -2.9 -2.7 -2.5 -2.2 -1.5 -1.1 50 Contribution from real exchange rate depreciation -1.1 -3.9 -2.3 ... ... ... ... ... ... ... ... 45 Other identified debt-creating flows 0.0 0.0 0.0 0.3 -0.5 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 0.0 40 35 Privatization receipts (negative) 0.0 0.0 0.0 0.0 -0.5 0.0 0.0 0.0 0.0 0.0 0.0 30 Recognition of contingent liabilities (e.g., bank recapitalization) 0.0 0.0 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 25 Debt relief (HIPC and other) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 20 Other debt creating or reducing flow (liquid financial asset) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 15 Residual 0.9 1.9 1.4 14.9 -1.9 -0.8 -0.6 -0.6 -0.6 -0.6 -0.1 4.0 0.6 10 5 Sustainability indicators 0 PV of public debt-to-GDP ratio 2/ ... ... 31.1 38.8 33.2 30.5 28.4 26.7 25.4 19.8 19.3 2025 2027 2029 2031 2033 2035 PV of public debt-to-revenue and grants ratio … … 412.3 390.6 321.4 270.4 243.6 225.3 212.2 165.0 153.1 Debt service-to-revenue and grants ratio 3/ 47.9 59.7 54.0 43.4 42.1 35.1 45.0 52.2 60.4 73.3 59.2 Gross financing need 4/ 7.8 7.1 5.7 5.4 4.8 5.0 6.2 6.9 7.9 9.1 7.7 of which: held by residents Key macroeconomic and fiscal assumptions of which: held by non-residents 50 Real GDP growth (in percent) 6.4 7.2 8.1 6.6 7.1 7.7 8.0 7.8 7.5 6.5 5.5 7.9 7.2 45 Average nominal interest rate on external debt (in percent) 1.8 1.5 0.9 2.4 2.2 2.3 2.3 2.3 2.1 1.5 0.9 1.9 2.0 40 Average real interest rate on domestic debt (in percent) -23.6 -22.2 -16.3 -15.5 -8.9 -3.4 -1.4 0.7 2.7 4.6 6.1 -11.5 -0.6 35 Real exchange rate depreciation (in percent, + indicates depreciation) -4.4 -17.7 -13.8 … ... ... ... ... ... ... ... -2.7 ... 30 25 Inflation rate (GDP deflator, in percent) 33.3 32.2 24.7 23.7 19.0 13.1 11.9 10.4 8.8 10.5 6.3 18.2 12.5 20 Growth of real primary spending (deflated by GDP deflator, in percent) -1.4 -9.2 -4.9 24.4 12.6 18.1 10.5 7.8 7.3 6.1 5.7 1.6 10.3 15 Primary deficit that stabilizes the debt-to-GDP ratio 5/ 11.0 10.9 7.4 -10.4 6.7 4.0 3.4 3.0 2.5 1.5 0.3 9.8 1.7 10 PV of contingent liabilities (not included in public sector debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 5 0 2025 2027 2029 2031 2033 2035 Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The central, state, and local governments, central bank, government-guaranteed debt, non-guaranteed SOE debt . Definition of external debt is Residency-based. Presented on fiscal year basis (e.g., 2020 referes to fiscal year ending in June 2020). 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years. 20 >>> 3 # PV of debt-to GDP ratio PV of debt-to-exports ratio 35 300 # 30 250 25 200 20 150 15 100 10 5 50 Most extreme shock: One-time depreciation Most extreme shock: Exports 0 0 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 Debt service-to-exports ratio Debt service-to-revenue ratio 30 30 30 25 30 25 25 25 20 20 20 20 15 15 15 15 1010 10 10 5 5 5 5 Most Mostextreme shock: extreme Exports shock: Exports Most Mostextreme extremeshock: One-time shock: depreciation One-time depreciation 0 0 0 2025 2027 2029 2031 2033 2035 0 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 2025 2027 2029 2031 2033 2035 Baseline Historical scenario Most extreme shock 1/ Threshold Baseline Historical scenario Most extreme shock 1/ Threshold Borrowing assumptions on additional financing needs resulting from the Customization of Default Settings stress tests* Size Interactions Size Interactions Default User Default Defined User defined Shares of marginal debt No No External PPG MLT debt 100% Tailored Stress Terms of marginal debt Combined CL Yes Avg. nominal interest rate on new borrowing in USD 1.1% 1.1% Natural disaster n.a. n.a. USD Discount rate 5.0% 5.0% Commodity price n.a. n.a. Avg. maturity (incl. grace period) 32 32 Market financing No No Avg. grace period 6 6 Note: "Yes" indicates any change to the size or * Note: All the additional financing needs generated by the shocks under the interactions of the default settings for the stress tests are assumed to be covered by PPG external MLT debt in the stress tests. "n.a." indicates that the stress test external DSA. Default terms of marginal debt are based on baseline 10-year does not apply. projections. 21 >>> PV of Debt-to-GDP Ratio 50 45 40 35 30 25 20 15 10 5 Most extreme shock: Combined contingent liabilities 0 2024 2026 2028 2030 2032 2034 PV of Debt-to-Revenue Ratio Debt Service-to-Revenue Ratio 600 450 90 100 400 90 80 500 350 80 70 70 400 300 60 60 250 50 300 50 200 40 40 200 150 30 30 100 20 20 100 Most extreme shock: One-time Most extreme shock: Growth extreme Most 50 shock: Combined 10 10 Most extreme shock: Growth depreciation contingent liabilities 0 0 00 2025 2027 20292030 2031 2032 2033 2035 2025 2027 2026 2029 2031 2033 2024 2026 2028 2034 2024 2028 2030 2035 2032 2034 Baseline Most extreme shock 1/ Baseline Most extreme shock 1/ TOTAL public debt benchmark Historical scenario TOTAL public debt benchmark Historical scenario Borrowing assumptions on additional financing needs resulting from the stress Default User defined tests* Shares of marginal debt External PPG medium and long-term 25% 30% Domestic medium and long-term 25% 25% Domestic short-term 50% 45% Terms of marginal debt External MLT debt Avg. nominal interest rate on new borrowing in USD 1.2% 1.2% Avg. maturity (incl. grace period) 31 31 Avg. grace period 6 6 Domestic MLT debt Avg. real interest rate on new borrowing 0.7% 0.7% Avg. maturity (incl. grace period) 7 7 Avg. grace period 2 2 Domestic short-term debt Avg. real interest rate 1.4% 1.4% * Note: The public DSA allows for domestic financing to cover the additional financing needs generated by the shocks under the stress tests in the public DSA. Default terms of marginal debt are based on baseline 10-year projections. Sources: Country authorities; and staff estimates and projections. 1/ The most extreme stress test is the test that yields the highest ratio in or before 2034. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented. 22 >>> Projections 1/ 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 PV of debt-to GDP ratio Baseline 20 19 17 16 13 12 10 9 8 7 6 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 20 19 19 19 18 17 17 16 15 15 14 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 20 19 18 16 14 12 11 9 8 7 6 B2. Primary balance 20 19 19 17 15 13 12 10 9 8 7 B3. Exports 20 20 19 17 15 13 12 10 9 8 7 B4. Other flows 3/ 20 21 21 19 16 14 13 11 10 9 7 B5. Depreciation 20 28 22 20 17 15 13 11 10 8 7 B6. Combination of B1-B5 20 21 20 19 16 14 12 11 10 8 7 C. Tailored Tests C1. Combined contingent liabilities 20 21 19 18 16 14 13 11 10 9 8 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 20 21 19 17 15 13 11 10 9 8 7 Threshold 30 30 30 30 30 30 30 30 30 30 30 PV of debt-to-exports ratio Baseline 209 192 171 152 134 117 104 94 83 73 65 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 209 198 190 186 182 174 171 169 163 158 154 0 B. Bound Tests B1. Real GDP growth 209 192 171 152 134 117 104 94 83 73 65 B2. Primary balance 209 196 186 168 150 133 120 111 98 88 79 B3. Exports 209 228 259 231 205 181 162 148 130 115 101 B4. Other flows 3/ 209 211 204 182 162 144 129 118 104 92 81 B5. Depreciation 209 192 150 133 116 100 89 80 69 61 54 B6. Combination of B1-B5 209 229 193 215 191 169 151 138 122 108 95 C. Tailored Tests C1. Combined contingent liabilities 209 208 192 175 159 143 130 121 109 99 90 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 209 193 171 152 134 117 104 94 82 73 64 Threshold 140 140 140 140 140 140 140 140 140 140 140 Debt service-to-exports ratio Baseline 25.2 16.5 15.4 17.1 16.4 13.5 8.9 8.6 8.0 7.4 6.7 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 25 16 15 17 16 13 9 9 9 9 9 0 B. Bound Tests B1. Real GDP growth 25 17 15 17 16 13 9 9 8 7 7 B2. Primary balance 25 17 16 18 17 14 9 9 9 8 7 B3. Exports 25 19 21 24 23 19 12 12 11 11 10 B4. Other flows 3/ 25 17 16 18 17 14 9 9 9 9 8 B5. Depreciation 25 17 15 17 16 13 9 8 8 7 6 B6. Combination of B1-B5 25 18 20 22 21 17 12 11 11 11 9 C. Tailored Tests C1. Combined contingent liabilities 25 17 16 17 17 14 9 9 8 8 7 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 25 17 15 17 17 14 10 10 8 7 6 Threshold 10 10 10 10 10 10 10 10 10 10 10 Debt service-to-revenue ratio Baseline 28 17 14 15 14 12 8 7 6 6 5 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 28 16 14 15 14 11 8 7 7 7 7 0 28 17 15 18 17 15 10 10 9 8 6 B. Bound Tests B1. Real GDP growth 28 17 15 16 15 12 8 7 7 6 6 B2. Primary balance 28 17 15 16 15 12 8 8 7 7 6 B3. Exports 28 17 14 16 15 12 8 7 7 7 6 B4. Other flows 3/ 28 17 15 16 15 12 8 7 7 7 6 B5. Depreciation 28 25 21 22 21 17 11 10 9 8 7 B6. Combination of B1-B5 28 17 15 17 15 12 8 8 7 7 6 C. Tailored Tests C1. Combined contingent liabilities 28 17 15 16 15 12 8 7 7 6 6 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 28 17 14 16 14 12 8 8 7 6 5 Threshold 14 14 14 14 14 14 14 14 14 14 14 Memorandum item: Grant element assumed on residual financing (i.e., financing required above baseline) 6/ 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 46.4 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the threshold. 2/ Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows. 3/ Includes official and private transfers and FDI. 23 >>> Projections 1/ 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 PV of Debt-to-GDP Ratio Baseline 39 33 31 28 27 25 24 23 22 21 20 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 39 34 31 28 25 23 21 20 18 18 17 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A B. Bound Tests B1. Real GDP growth 39 34 33 31 29 28 27 26 25 24 24 B2. Primary balance 39 35 35 32 30 28 27 25 24 23 22 B3. Exports 39 34 33 30 28 27 26 24 23 22 21 B4. Other flows 3/ 39 35 34 32 30 28 27 25 24 23 21 B5. Depreciation 39 42 37 33 30 27 25 23 21 19 18 B6. Combination of B1-B5 39 33 31 29 27 25 24 22 21 20 19 C. Tailored Tests C1. Combined contingent liabilities 39 41 38 35 32 31 29 27 26 24 23 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 39 33 31 28 27 25 24 23 22 21 20 TOTAL public debt benchmark 35 35 35 35 35 35 35 35 35 35 35 PV of Debt-to-Revenue Ratio Baseline 391 322 271 244 226 212 203 192 182 173 165 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 391 329 271 238 214 193 178 166 156 149 144 0 44 24 23 28 33 41 46 51 57 63 69 B. Bound Tests B1. Real GDP growth 391 330 288 263 247 236 228 220 211 203 197 B2. Primary balance 391 340 308 276 254 238 226 214 201 190 181 B3. Exports 391 328 289 260 240 226 215 204 192 182 173 B4. Other flows 3/ 391 339 302 271 250 235 224 212 199 188 178 B5. Depreciation 391 410 329 282 250 226 209 192 175 160 148 B6. Combination of B1-B5 391 316 278 247 227 212 200 188 176 165 156 C. Tailored Tests C1. Combined contingent liabilities 391 400 333 298 274 256 243 229 215 203 193 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 391 322 271 244 226 213 202 192 181 172 165 Debt Service-to-Revenue Ratio Baseline 44 42 35 45 52 61 65 68 70 73 74 A. Alternative Scenarios A1. Key variables at their historical averages in 2025-2035 2/ 44 42 34 41 45 48 47 46 46 46 47 0 44 24 23 28 33 41 46 51 57 63 69 B. Bound Tests B1. Real GDP growth 44 43 38 50 59 68 73 78 80 83 85 B2. Primary balance 44 42 45 60 62 68 72 75 76 77 78 B3. Exports 44 42 35 45 53 61 65 69 71 73 74 B4. Other flows 3/ 44 42 35 46 53 61 65 69 71 74 74 B5. Depreciation 44 44 41 50 56 62 63 66 67 69 69 B6. Combination of B1-B5 44 40 35 47 52 59 63 67 68 70 71 C. Tailored Tests C1. Combined contingent liabilities 44 42 76 69 69 74 77 79 79 80 79 C2. Natural disaster … … … … … … … … … … … C3. Commodity price … … … … … … … … … … … C4. Market Financing 44 42 35 45 53 61 66 69 71 72 73 Sources: Country authorities; and staff estimates and projections. 1/ A bold value indicates a breach of the benchmark. 2/ Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP. 3/ Includes official and private transfers and FDI. 24 >>> Gross Nominal Public Debt Gi flows Debt-creating Unexpected Changes in Debt 1/ (in percent of GDP; DSA vintages) Residual 50 (percentof GDP) (past 5 years, percent of GDP) Current DSA proj. 25 Previous DSA Interquartil Other debt 20 e range 80 DSA-2019 creating flows 15 (25-75) 70 Real Exchange 10 60 rate 5 depreciation 0 50 Real GDP 0 Change in growth -5 debt 40 Real interest -10 30 rate -15 20 Primary deficit -20 10 -50 -25 Median 0 Change in 5-year 5-year -30 Contribution of historical projected unexpected Distribution across LICs 2/ 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 debt change change 1/ Difference between anticipated and actual contributions on debt ratios. 1 Difference between anticipated and actual contributions on debt rations. 2/ Distribution across LICs for which LIC DSAs were produced. 2 3/Distribution across Given the relatively LICs low private for which external LIC DSAs debt for average were low-income produced. countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 3 Given the relatively low private external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation. 25 >>> 3-Year Adjustment in Primary Balance Fiscal Adjustment and Possible Growth Paths 1/ (Percentage points of GDP) 10 1 14 Distribution 1/ 9 12 Projected 3-yr 8 3-year PB adjustment greater In percentage points of GDP adjustment than 2.5 percentage points of 7 10 GDP in approx. top quartile 6 In percent 8 5 0 4 6 3 4 2 1 2 0 -1 0 2019 2020 2021 2022 2023 2024 2025 2026 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 more -4.5 -4.0 -3.5 -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 Baseline Multiplier = 0.2 Multiplier = 0.4 Multiplier = 0.6 Multiplier = 0.8 1/ Data cover Fund-supported programs for LICs (excluding emergency financing) approved since 1990. 1/ Bars refer to annual projected fiscal adjustment (right-hand side scale) and lines show possible real The size of 3-year adjustment from program inception is found on the horizontal axis; the percent of GDP growth paths under different fiscal multipliers (left-hand side scale). sample is found on the vertical axis. Public and Private Investment Rates Contribution to Real GDP growth (percent of GDP) (percent, 5-year average) 32 8 7 24 6 5 16 4 3 8 2 1 0 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Historical Projected (Prev. DSA) Projected (Curr. DSA) Gov. Invest. - Prev. DSA Gov. Invest. - Curr. DSA Contribution of other factors Priv. Invest. - Prev. DSA Priv. Invest. - Curr. DSA Contribution of government capital 26 >>> GFN GFN 1/ 1/ EMBI EMBI 2/ 2/ Benchmarks 14 570 Benchmarks 14 570 Values 7 4612 Values 7 4612 Breach of benchmark No Yes Breach of benchmark No Yes Potential heightened Potential heightened liquidity needs Moderate liquidity needs Moderate 1/ Maximum gross financing needs (GFN) over 3-year baseline projection horizon. 1/ 2/ EMBI spreads Maximum grosscorrespond as of January financing needs 18, 2024. (GFN) over 3-year baseline projection horizon. 2/ EMBI spreads PV correspond of debt-to as GDPof January ratio 18, 2024. PV of debt-to-exports ratio 35 250 3530 PV of debt-to GDP ratio 250 PV of debt-to-exports ratio 35 250 200 3025 30 200 20 150 200 25 25 15 20 150 100 20 10 150 15 5 15 50 100 100 10 0 10 0 2024 2026 2028 2030 2032 2034 50 2024 5 50 2026 2028 2030 2032 2034 5 00 Debt service-to-exports ratio 0 Debt service-to-revenue ratio 30 0 30 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2025 2027 2029 2031 2033 2035 2024 2026 2028 2030 2032 2034 25 25 Debt service-to-exports ratio Debt service-to-revenue ratio 30 20 20 30 15 15 25 25 10 10 20 20 5 5 15 15 0 0 10 2024 2026 2028 2030 2032 2034 10 2024 2026 2028 2030 2032 2034 Baseline Market 5financing Threshold 5 0 Sources: Country authorities; and staff estimates and 0 projections. 2024 2026 2028 2030 2032 2034 2024 2026 2028 2030 2032 2034 Baseline Market financing Threshold Sources:Country Sources: Country authorities; authorities; andand staff staff estimates estimates and projections. and projections . 27 >>> Domestic debt to GDP ratio Domestic debt service to revenues incl. grants Net domestic debt issuance 1/ 30 80 6.0 25.0 70 5.0 25 20.0 60 4.0 20 15.0 50 3.0 15 40 10.0 2.0 30 10 5.0 1.0 20 5 0.0 10 0.0 0 0 -1.0 -5.0 2020 2022 2024 2026 2028 2030 2032 2034 2020 2022 2024 2026 2028 2030 2032 2034 2020 2022 2024 2026 2028 2030 2032 2034 Historical realizations As a ratio to GDP (LHS) Median of average projected values over the first five years of the forecast period As a ratio to domestic debt stock in prev. year (RHS) across countries using the LIC DSF with non-zero domestic debt, end-2023 Borrowing Assumptions (average over 10-year projection) Value Shares in new domestic debt issuance Value Medium and long-term 31% Short-term 69% Borrowing terms Domestic MLT debt Avg. real interest rate on new borrowing 3.9% Avg. maturity (incl. grace period) 6 Avg. grace period 1 Domestic short-term debt Avg. real interest rate 3.7% Sources: Country authorities; and staff estimates and projections. Note: 1/ Net domestic debt issuance is an estimate based on the calculated public gross financing need net of gross external financing, drawdown of assets, Sources: Country authorities and staff estimates and projections other adjustments and domestic debt amortization. It excludes short-term debt that was issued and matured within the calendar year. 1/ Net domestic debt issuance is an estimate based on the calculated public gross financing need net of gross external financing, drawdown of assets, other adjustments, and domestic amortization. It excludes short-term debt that was issued and matured within the calendar year. 28 >>>