Ethiopia’s hopes of repairing damage to its financial credibility suffered a heavy blow this week as debt restructuring negotiations with bondholders collapsed on Tuesday, leaving the country in limbo amid a massive macroeconomic reform program.
Ethiopia defaulted on its USD one billion Eurobond in December 2023, and negotiations with bondholders have been part of the country’s efforts for wider debt restructuring under the G20 Common Framework.
The talks were thought to have been going well prior to this week’s developments, especially following reports in July that Ethiopia had signed an MoU with its Official Creditors Committee, granting it USD 3.5 billion in debt relief.
However, negotiations with private creditors have “reached an impasse” despite the Ethiopian government securing a 15 percent write-off.
Bondholders reportedly have reservations about the terms of the restructuring and doubts about the veracity of the country’s recent export achievements, particularly relating to gold and coffee.
Ethiopia registered a record-breaking USD 8.3 billion in export revenues in 2024/25.
However, bondholders argue the figures are not represented in the IMF’s economic forecasts, making them unwilling to accept terms they see as too lenient.
The bondholder committee has stated it is considering legal action, but remains open to considering revised proposals from Ethiopia.
Meanwhile, at the annual IMF conference this week, the Ethiopian delegation headed by Finance Minister Ahmed Shide requested additional low-interest loans in addition to the negotiations.
Economists and finance experts who spoke to The Reporter warn the government must be more cautious than ever about how it deals with debt.
Investment consultant Kefelegn Hailu observes a lack of trust is behind the negotiations falling through.
“The Ethiopian government, for instance, claimed to have made 3.5 billion dollars from the export of coffee and gold, but the bondholders disagreed with this, claiming it did not align with IMF’s conclusions. This generates distress. The Ethiopian government claims that it has generated healthy revenue and is able to pay back the loan. An agreement must be reached at the end of the negotiations to secure more loans. Therefore, careful implementation of parallel agreements is necessary,” he said.
