By Aaron Ross
ADDIS ABABA (Reuters) – An agreement being finalised with Ethiopia’s official bilateral creditors is expected to largely mirror a previous deal with China that suspended debt payments for the fiscal year ending next July, a senior finance ministry official said on Thursday.
Eyob Tekalign, State Minister of Fiscal Policy and Public Finance, also said in an interview that the government was reaching out to holders of a Eurobond maturing in December 2024 to set up meetings about a restructuring.
Ethiopia, Africa’s second most populous nation with about 120 million people, has drawn strong investor interest since Prime Minister Abiy Ahmed came to power in 2018 promising to liberalise a tightly-controlled economy.
But it has been saddled by double-digit inflation, hard currency shortages, growing debt repayments and conflicts in several regions.
The finance ministry announced on Wednesday that Ethiopia had reached an agreement in principle with its official bilateral creditors on an interim debt-service suspension, after striking a deal in August with China.
“With China … we have a two-year debt suspension,” said Eyob. “So essentially the creditors committee has put forward the same proposal for all our other creditors – largely similar terms. Some could be more favourable.”
“The idea is to give us enough space until we work out the full restructuring under the G20 framework,” he said, referring to a process set up by G20 countries in response to the COVID-19 pandemic.
Ethiopia first requested a restructuring under the G20 Common Framework in 2021. It had more than $28 billion of external debt at the end of March this year.
The country has also been negotiating a lending programme with the International Monetary Fund (IMF) and said on Wednesday it would start talks to restructure a $1 billion Eurobond maturing in December of next year.
Eyob said an IMF deal would still require “financing assurances from the Common Framework on the full debt restructuring”, while the government was reaching out to bondholders to set up meetings.
“The maturity is quite close, so it would be useful to have a real conversation,” he said, adding that a coupon payment due next month would depend on the outcome of talks with the bondholders.
A major government priority has been the opening up of the telecommunications sector, which has been considered a top prize in Abiy’s liberalisation drive.
Ethiopia awarded a first private license to Kenya’s Safaricom, which rolled out its mobile network a year ago, and launched a tender process for a second license in June.
Bloomberg reported on Tuesday that the process had failed to attract any bids and was likely to be put on hold. The head of the Ethiopian Communications Authority denied the report, saying it had not requested bids from operators but rather statements of their qualifications that could be used to assess the market.
Eyob said that some companies had submitted their qualifications but acknowledged that it might take longer to find a suitable candidate than anticipated.
“There are submissions but not to the kind of quality and quantity that we have expected,” he said.
(Reporting by Aaron Ross; Additional reporting by Dawit Endeshaw; Editing by Toby Chopra)