362 However, information obtained by the CRM indicates that Ethiopia’s external debt levels are rising significantly as major public enterprises borrow externally to finance infrastructure investment. The stock of debt (in NPV terms) is set to rise from $1.3 billion at end-June 2008 to $6.0 billion by end-June 2011, with almost 70 percent of the increase accounted for by the state-owned electric power (EEPCo) and telecom (ETC) companies. Although the case for large-scale investment in these sectors is compelling, the sizeable and rapid build-up of debt underscores the need to ensure that borrowed funds are being put to effective use, a supportive business environment is being put in place to ensure full take-up of infrastructure outputs, and that public enterprise pricing policy will ensure the full recovery of costs needed to facilitate debt service in the future. 363 Nonetheless, Ethiopia remains at moderate risk of debt distress, although the level of risk is higher now than a year ago. It is, therefore, important for Ethiopia to keep a close tab on debt vulnerabilities and make every effort to secure grant and concessional financing for its ambitious public enterprise investment plans. At the same time, there is considerable scope to attract large FDI and increase export growth by means of structural reforms. In addition, emphasis should be placed on strengthening debt management capacity as well as sharing detailed information on future borrowings – both external and domestic – with relevant stakeholders, such as the IMF and the Bank. Finally, given the size of borrowing by public enterprises, it is imperative to expand the current debt strategy and monitoring exercise to include the largest public enterprises and assess potential contingent liabilities. - 152 -