Ethiopia’s efforts to restructure its sovereign debt have hit a roadblock after negotiations with private bondholders ended without agreement, deepening uncertainty over the country’s only international bond.
The government said differences over key financial terms had led to the breakdown, though “substantial progress” was made and talks could resume soon.
The East African nation defaulted on its USD 1 billion Eurobond in late 2023 after seeking relief under the G20’s Common Framework, which aims to coordinate debt restructuring among official and private creditors. Bondholders, including major investment firms such as Morgan Stanley Investment Management and Franklin Templeton, had offered a 15 percent reduction in principal along with a value-recovery mechanism linked to Ethiopia’s export performance.
However, the committee said it faced challenges meeting the Common Framework’s “comparability of treatment” rule since it had not seen the terms of Ethiopia’s deal with official lenders, most notably China, which accounts for nearly a quarter of the country’s USD 31 billion external debt. The group said negotiations had reached an impasse and would now consider “all options,” including legal action.
The bond fell by about one cent to trade near 95 cents on the dollar, still close to its highest level since early 2021. Analysts say the stalemate highlights flaws in the Common Framework, which has been criticized for slow progress in countries such as Zambia and Ghana. Ethiopia’s talks come amid broader efforts to stabilize its economy, backed by support from the IMF and World Bank and a USD 4.9 billion debt relief package.
Source: Reuters