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Ethiopia’s official creditors are nearing the completion of a debt restructuring agreement that will extend payment deadlines, but will not involve any reduction of the country’s outstanding debt, as confirmed by William Roos, co-chair of the Official Creditor Committee (OCC).
Following its default in December 2023, Ethiopia reached a preliminary deal in March with its creditors to restructure $8.4 billion in debt, marking a key milestone in addressing its sovereign default. The deal will provide the country with around $2.5 billion in debt relief, which will be applied through 2028 and is in line with the country’s program with the International Monetary Fund (IMF).
Roos explained that the deal aims to reduce Ethiopia’s overall debt burden by extending the maturity dates, thereby easing the pressure on payments during the IMF program. Although some bondholders view the country’s financial crisis as a liquidity problem, Roos emphasized that Ethiopia’s situation is a combination of liquidity challenges and the need to significantly reduce its debt stock.
The restructuring process follows the G20 Common Framework guidelines, but Ethiopia is still at odds with holders of its $1 billion Eurobond. Bondholders have rejected the proposed 18% reduction in debt, arguing that the IMF’s debt sustainability analysis is flawed, particularly in its valuation of the country’s gold and coffee exports.
Roos highlighted that cooperation between the two OCC co-chairs, France and China, has been highly effective, but noted that three creditors— the United Arab Emirates, Kuwait, and Poland—have opted to pursue separate renegotiations.
