Ethiopia has reached a preliminary agreement with a group of investors holding part of its $1 billion 2024 international bond, the finance ministry said, marking a key step in the country’s efforts to restructure its debt, Reuters reported.
In a statement posted on the ministry’s official Facebook page on Friday, the government said the draft agreement sets out the main financial terms of the restructuring.
However, it added that discussions are still needed on the non-financial terms of the new instrument that will replace the defaulted bonds, which must be agreed with the Ad Hoc Committee of bondholders.
The ministry said it has shared the terms of the agreement with the International Monetary Fund and Ethiopia’s Official Creditor Committee and is awaiting feedback from both.
“The terms of the Agreement in Principle have been communicated to the OCC for their non-objection as well as to the IMF to ensure compliance with Ethiopia’s long-term debt sustainability,” the statement said.
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Ethiopia, an East African nation, defaulted on its only international bond in late 2023 and chose to restructure its debt under the G20 Common Framework, which requires comparable treatment of debts owed to bilateral lenders, Eurobond holders and other commercial creditors.
While the government has been in talks with bondholders for several months, progress has been slow.
In July, Ethiopia finalised a restructuring agreement with its bilateral creditors, which the finance ministry said would deliver more than $3.5 billion in cashflow relief and open the door to negotiations with bondholders.
The statement said Ethiopia held formal talks with the bondholder group between December 23 and January 1, adding that the Ad Hoc Committee consists of institutional investors who collectively control more than 45% of the 2024 bond. Ethiopia said it aims to implement the restructuring as early as possible in 2026.
An IMF spokesperson welcomed the agreement, saying: “This marks an important step toward restoring debt sustainability.” The spokesperson added in an emailed statement, “We will assess the consistency of the agreement with the objectives and parameters of the IMF-supported program in the coming days.”
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Image Credit: EBC
