The move temporarily eases Ethiopia's financial burden as it seeks a wider funding program.
The accord was announced on Wednesday by National Bank of Ethiopia governor Mamo Mihretu and confirmed in a statement from the Paris Club of creditor nations on Thursday which described it as an "important achievement".
"We've been able to achieve an interim debt service suspension and therefore able to save around $1.5 billion that would have gone to debt servicing," Mamo told a parliamentary committee.
Ethiopia's finances have been hit by the two-year conflict in the northern region of Tigray that ended with a peace deal in November last year.
The Horn of Africa nation has said it needs around $20 billion to rebuild its northern regions after the war that claimed the lives of around half a million people, according to US estimates.
Ethiopia has about $28 billion of external debt and is also grappling with sky-high inflation at and a shortage of foreign currency reserves. The debt relief agreement was reached with bilateral creditors, including China which has loaned Ethiopia around $14 billion according to analysts.
"This debt standstill from Ethiopia's official bilateral creditors will provide time-limited liquidity relief ahead of discussions on a wider debt treatment," the Paris club said in a statement.
Ethiopia has been in discussions with the International Monetary Fund for a program of financial support for its economic reforms.
After coming to power in 2018, Prime Minister Abiy Ahmed announced an ambitious reform package to open up the country's tightly controlled economy. But the economy has deteriorated sharply in recent years and the will to continue the reforms has largely stalled.
The Fitch Ratings agency earlier this month downgraded Ethiopia's debt further into junk territory to CC, a level it said "reflects a probable risk of a default event."
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