The Ministry of Finance has confirmed that negotiations with private creditors over Ethiopia’s USD 1 billion Eurobond, due in 2024, have collapsed without a deal, intensifying the country’s ongoing debt restructuring challenge under its IMF program.

The talks, held between September 25 and October 13, failed to bridge gaps on repayment terms, though both sides left open the possibility of renewed discussions. Ethiopia had proposed a USD 840 million bond maturing in 2030 with a 4.75% coupon and a 16% nominal haircut, while bondholders countered with a USD 900 million bond maturing in 2029, a 10% haircut, and a 6.625% coupon. Disagreements over recovery instruments and export-linked incentives ultimately stalled progress.

Ethiopia’s revised proposal of an USD 850 million bond with a 6.125% coupon and a modest Value Recovery Instrument was rejected by the Ad Hoc Committee, which sought stronger recovery terms and larger notional caps.

The Ministry cited “substantial progress” despite the breakdown, reiterating its commitment to equitable treatment between private and official creditors. The government now plans urgent consultations with the IMF and the Official Creditor Committee (OCC) to determine next steps.

Analysts warn that the deadlock could prolong Ethiopia’s default, ongoing since December 2023, and delay access to international markets. Ethiopia’s total external debt stood at USD 30.9 billion as of June 2024, with multilateral creditors holding USD 15.3 billion and Eurobond obligations totaling USD 1.1 billion.

Source: Capital Newspaper