Ethiopia agrees bilateral debt-service suspension, seeks Eurobond restructuring

By Alexander Winning and Rachel Savage

(Reuters) -Ethiopia has reached an agreement in principle with its official bilateral creditors on an interim debt-service suspension and will start talks to restructure a $1 billion Eurobond maturing next year, its finance ministry said on Wednesday.

Ethiopia’s economy is under pressure from double-digit inflation, hard currency shortages and growing debt repayments, a year after the federal government and forces from the rebellious northern Tigray region signed a truce to end a two-year civil war.

The East African country requested the debt-service suspension while carrying out programme discussions with the International Monetary Fund (IMF) and holding debt restructuring negotiations with official bilateral creditors under the G20’s Common Framework, the finance ministry said in a statement.

“The agreed interim debt-service suspension aims at … providing the country with appropriate breathing space for the period 2023 and 2024. The redemption terms for the suspended amount will maximise debt-service relief during the prospective IMF programme years while avoiding a bunching of maturities after the programme.”

“The circumstances which have necessitated an interim debt service relief from the OCC (Official Creditors Committee) also impact the country’s ability to service other external debts, including the Eurobond,” it added.

Ethiopian authorities said in August that China, which co-chairs its official creditors committee, was allowing the country to suspend debt payments for the fiscal year running until July 7, 2024. An IMF official said in October that Ethiopia was seeking a “similar” deal from other creditors.

Ethiopia had originally requested a debt rework under the Common Framework, a process set up by G20 countries in response to the COVID-19 pandemic, in early 2021 but the process was delayed by its civil war.

Ethiopia had more than $28 billion of external debt at the end of March.

Between 2006 and 2022, Chinese lenders committed to more than $14 billion of loans to Ethiopia, according to Boston University.

An informal group of international bondholders in February proposed to Ethiopia’s government an extension of the maturity of the 2024 bond to 2029 or 2030, with an amortising structure to avoid a lump sum payment at the end.

Ethiopia’s 2024 Eurobond had fallen more than 1.5 cent on the dollar to just over 60.5 cents by 0852 GMT.

(Reporting by Alexander Winning and Rachel Savage; Editing by George Obulutsa, Nellie Peyton and Alex Richardson)