The government decides to transfer 100 percent of debts of Ethiopian Railway Corporation and Ethiopian Sugar Corporation to the new commercial entity recently established to consolidate borrowings of state-owned enterprises.
Liability Asset Management Corporation will soak up the debts of the two state-owned entities, while it will administer and takeover 20 percent of the debts of Ethiopian Electric Power and Ethiopian Electric Utility.
The newly established Corporation, which will be financed using privatization proceeds and dividends of SoEs, will also use foreign currency expected to be earned from the liberalization of the telecom sector, adding to its possible engagement in other income generating activities, in order to service debts of SOEs.
This approach will ensure that debt service on the SOE stays on track without burdening the central government’s annual budget, according to the Ministry of Finance.
Seven SOEs were identified by the Ministry for having a high risk of debt distress. The SoES are Ethiopian Electric Power, Ethiopian Electric Utility, Ethiopian Railway Corporation, Ethio-Engineering Group (formerly METEC), Chemical Industry Corporation, Construction Works Corporation, and the Sugar Corporation. They owes close to 780 billion ETB (19.5 billion dollars) to domestic and external lenders, a data obtained from the Ministry indicates.