Ethiopia attracted $4 billion in foreign direct investment during fiscal 2025, representing modest growth amid ongoing international bond restructuring negotiations.
The Ethiopian Investment Commission reported a 2.2 percent increase from the previous year, with far-reaching economic reforms backed by the International Monetary Fund contributing to enhanced investor confidence. The birr currency floatation and broader structural adjustments have created more favorable conditions for international business operations.
These investment figures carry significant implications for Ethiopia’s $1 billion international bond restructuring process following the country’s default. The government has proposed an 18 percent writedown for bondholders, arguing that Ethiopia faces insolvency challenges requiring substantial debt relief measures.
However, a consortium of bondholders opposes this proposal, contending that Ethiopia experiences only short-term liquidity constraints rather than fundamental solvency problems. They cite strong export earnings and improving foreign investment flows as evidence supporting their position against significant principal reductions.
The Investment Commission issued 525 new permits to overseas investors during the review period, alongside 19 expansion permits for existing projects. These investments target manufacturing, agriculture, and information technology sectors, aligning with government priorities for economic diversification and technological advancement.
Manufacturing investments particularly focus on textile production and agro-processing facilities designed to leverage Ethiopia’s competitive labor costs and improving infrastructure connectivity. The agricultural sector continues attracting investment in commercial farming operations and food processing capabilities serving both domestic and regional markets.
Information technology investments concentrate on software development, telecommunications infrastructure, and digital financial services platforms targeting Ethiopia’s large population and growing mobile connectivity rates. These sectors benefit from government incentives and regulatory reforms aimed at accelerating digital transformation initiatives.
The IMF has warned about potential balance of payments risks, primarily due to lower-than-expected aid flows and foreign investment levels. Completed bilateral creditor debt restructuring in July 2025 paved the way for formal bondeholder negotiations expected to commence shortly.
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