Addis Ababa: The government’s recent approval to settle the outstanding debt of the Commercial Bank of Ethiopia (CBE) is expected to reinforce the bank’s financial foundation. This was stated during today’s regular session of the House of Peoples Representative.
According to Ethiopian News Agency, during today’s fourth regular session of its fourth working year, the House of People’s Representatives reviewed and approved several legislative bills, including the draft government debt policy. However, one draft has been referred to a standing committee for further review.
The House unanimously adopted the draft debt bill following deliberations. Government Chief Whip Tesfaye Beljige recalled that the outstanding debt CBE extended to public enterprises had been decided to be transferred to Asset Management Corporation.
The corporation was expected to draw from the Industrial Development Fund, revenue from business activities, and other designated funds to manage debt servicing.
The approved debt plan, howeve
r, highlighted a significant issue: insufficient revenue sources have delayed timely debt payments, causing the interest burden on the debt to increase.
CBE, currently holding an uncollected balance exceeding 845 billion birr, faces financial strain due to these pending obligations. Immediate action is essential to alleviate this burden and improve the bank’s financial performance.
Despite holding a leading market share in Ethiopia, CBE’s capital stands at only 4 billion birr. Increasing its capital is considered necessary to maintain this dominant position.
Given the financial pressure from loans provided to government development agencies, the government is proposing a 900 billion birr bond issuance to facilitate repayments and bolster the bank’s capital.
Members of the House have recognized the adverse financial impact that public enterprises have had on CBE’s stability, noting that the debt relief measures in the bill are suitable. However, they stressed the importance of improved financial management
among government agencies to prevent future issues.
State Minister of Finance, Eyob Tekalign emphasized the government’s commitment to transforming debt into manageable assets, adding that this initiative could make several enterprises profitable.
The measures, which include a three-year grace period and a ten-year repayment term, aim to position the bank on a solid financial footing and support its long-term sustainability.