Moody’s downgraded Ethiopia’s foreign currency (FC) long-term issuer rating to Caa3 from Caa2 but raised the outlook to stable from negative. This downgrade is primarily due to the high risk of default on FC-denominated private-sector debt, owing to liquidity constraints. Ethiopia has sought debt relief under the G20 Common Framework, indicating severe financial stress. The Ethiopian government mainly relies on its domestic banking sector for funding, and it aims to reduce fiscal deficits and attract more official sector funding as part of its financial strategy.