Ethiopia has reached a preliminary agreement with key bondholders to restructure its defaulted USD 1 billion international bond, marking a step toward resolving the country’s external debt challenges.
According to Ethiopia’s Ministry of Finance, the proposed agreement would see the country issue a new USD 880 million bond, to be repaid in installments between July 2026 and July 2029, with an interest rate of 6.15 percent. Ethiopia would also settle missed coupon payments totaling approximately USD 99.4 million, along with a consent fee.
The agreement includes a “New Money Warrant,” which would give bondholders the option to participate in a future Ethiopian bond issuance of up to USD 1 billion at a market-based interest rate. Under the proposal, Ethiopia would also have the option to settle the warrant in cash, subject to a cap of USD 90 million.
Ethiopia stated that the International Monetary Fund had reviewed the warrant structure and found it consistent with the country’s debt sustainability objectives. The Ministry also noted that the co-chairs of the Official Creditor Committee, China and France, had not raised objections to the proposal, although final approval from the broader creditor group remains pending.
The agreement follows several years of debt restructuring negotiations under the G20 Common Framework, an initiative established during the COVID-19 pandemic to facilitate debt treatments for eligible countries. Ethiopia sought debt relief under the framework in 2021 and defaulted on its international bond in December 2023.
Negotiations with commercial creditors proved challenging. An earlier agreement reached with bondholders in January 2026 collapsed after objections from official creditors, while a revised proposal was rejected by investors in May.
Following news of the preliminary agreement, Ethiopia’s international bond rose by nearly three cents, reaching its highest level since January, according to market data.
The Ministry of Finance said it plans to implement the restructuring through a bond exchange offer in the coming months, once the remaining terms are finalized and the required approvals from official creditors are secured.
Source: Reuters
