Ethiopia’s bondholder committee has strongly criticized the latest report by the International Monetary Fund (IMF), claiming it contains significant flaws that “artificially” present a solvency issue for the East African nation. The assertion, made in a statement on Monday, suggests that the IMF’s analysis could lead to unnecessary debt relief measures.
Ethiopia defaulted on its only $1 billion Eurobond in December 2023, and negotiations over restructuring have been slow and contentious. The core disagreement between Ethiopia, its bondholders, and the IMF centers on whether the country is facing a liquidity crisis—where it needs more time to pay—or a solvency crisis, which would necessitate debt writedowns, commonly known as haircuts.
IMF Report Under Fire
“The Committee disagrees with the conclusions reached by the IMF in the staff report,” the bondholder group stated, adding that the report incorporates “export projections and reserve adequacy targets that do not align with the Committee’s assessment of Ethiopia’s economic fundamentals.”
The group further argued that the report fails to recognize recent macroeconomic improvements, including stronger exports of key commodities such as gold and coffee. According to the statement, the IMF’s conclusions “artificially create a solvency issue for Ethiopia” and contain “significant flaws.”
Neither the IMF nor the Ethiopian government has responded to requests for comment.
Ongoing Debt Restructuring Talks
Ethiopia, Africa’s second-most populous nation, delayed restructuring its international debt until securing a $3.4 billion IMF bailout in July 2024. As part of the agreement, the country has been implementing major economic reforms, including the floatation of its currency, the birr.
The Ethiopian government has maintained that some level of bondholder losses is unavoidable, citing the IMF’s debt sustainability analysis. In 2024, authorities proposed an 18% haircut on the outstanding bond. Earlier this month, Finance Minister Ahmed Shide said negotiations with creditors were in the “final stages.”
Potential Legal Action
The bondholder committee, which represents investors holding more than 40% of Ethiopia’s Eurobond, has indicated it is considering legal action if necessary. The group warned that it “reserves the right to take action, including potential proceedings in English courts, to enforce Ethiopia’s obligations to repay the outstanding debt.”
Meanwhile, concerns over the IMF’s debt assessment have also been raised by some World Bank officials. However, the IMF has maintained that the World Bank signed off on its debt sustainability analysis.
As the dispute continues, the outcome of the debt restructuring talks will be crucial for Ethiopia’s financial stability and its ability to regain investor confidence in the capital markets.
Source: Reuters
