Ethiopia’s efforts to restructure its international debt have suffered another setback after bondholders rejected the government’s latest proposal, according to the Ministry of Finance.
The proposal, discussed during negotiations held from May 6 to May 27, reportedly included a 12% haircut on Ethiopia’s $1 billion Eurobond due in 2024. Bondholders declined the offer, prolonging a default situation that has remained unresolved since December 2023.
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The failed talks mark another difficult chapter in Ethiopia’s debt restructuring process under the G20 Common Framework. Earlier this year, some bondholders began legal preparations to pursue repayment through the courts after previous negotiations also failed to produce an agreement.
Ethiopia became the third African country after Zambia and Ghana to seek debt restructuring under the Common Framework as the country faced mounting foreign currency shortages, high inflation, and increasing debt servicing pressures. The government has argued that restructuring is necessary to restore macroeconomic stability and support ongoing economic reforms.
The latest impasse comes at a time when Ethiopia is implementing major economic reforms supported by the International Monetary Fund (IMF), including exchange rate liberalization, tax reforms, and efforts to modernize monetary policy. While the IMF and other official creditors have continued to support the country’s reform agenda, reaching a deal with private creditors remains one of the biggest outstanding challenges.
The country officially defaulted on its Eurobond in December 2023 after missing a $33 million interest payment. Since then, negotiations with bondholders have continued intermittently, with disagreements largely centered around the scale of debt relief required and the country’s future repayment capacity.
Analysts say a prolonged restructuring process could continue to affect Ethiopia’s access to international capital markets and investor confidence, even as the government pushes ahead with broader economic reforms.
Source: Bloomberg
