Ethiopia became Africa’s latest defaulter after it failed to make an interest payment following the end of a grace period on Monday.
The Horn of Africa nation had to pay a $33 million coupon on Dec. 11. The government didn’t want to make the payment because it “wants to treat all creditors in the same way,” Ahmed Shide, Ethiopia’s minister of finance said on state TV on Thursday.
Hinjat Shamil, senior reform advisor at the Ministry of Finance confirmed Monday that the payment had not, and will not be paid. Ethiopia reached an agreement with bilateral creditors last month to suspend debt payments.
The default puts Ethiopia among a growing number of developing nations that have defaulted on Eurobonds in recent years, including Zambia, Ghana and Sri Lanka.
In its counterproposal for a restructuring, the government asked bondholders to extend the maturity to amortize from July 2028 through to January 2032, and to reduce the coupon to 5.5% from the current 6.625%. However, the face value is to remain at $1 billion, meaning creditors won’t need to swallow a so-called haircut on their holdings.
An ad hoc committee of bondholders earlier this month said it views the decision not to make the payment as “both unnecessary and unfortunate.”
Ethiopia is seeking to renegotiate its obligations through the Group of 20’s Common Framework, which has started to gain momentum after Zambia and Ghana made progress in restructuring their debts. That allows debt relief from public as well as private lenders to be coordinated, to set debt treatment standards.
The nation reached an in-principle agreement with bilateral creditors to suspend debt payments, having sought to rework its liabilities since 2021 as a civil war in the northern Tigray region soured investor sentiment and sapped economic growth.
