By Dawit Endeshaw and Duncan Miriri
ADDIS ABABA (Reuters) -Ethiopia has reached an agreement in principle with its official creditors on restructuring $8.4 billion of debt, the finance ministry said on Friday, adding it hoped the deal could boost difficult talks with other creditors including bondholders.
The East African nation opted to restructure its external debt under the G20’s Common Framework in 2021, before it defaulted on its sole Eurobond in December 2023.
Under its current programme with the International Monetary Fund, Ethiopia has to return to debt sustainability and deliver a rework that reduces debt service by $3.5 billion over the period of the Fund programme, which expires in 2028.
The agreement with official creditors will go some way towards reaching that goal, providing some $2.5 billion of relief over the IMF programme period, the ministry said, as well as a significant smoothing of Ethiopia’s external redemption profile.
“This agreement marks a significant milestone in our efforts to normalize our relations with international partners and deliver economic stability,” Finance Minister Ahmed Shide was quoted saying in a statement by the ministry.
“This agreement will support ongoing good faith engagement with external commercial creditors, including bondholders,” the ministry said.
STANDOFF
Ethiopia has been locked in a standoff with a group of investors in its sole $1 billion Eurobond, which had matured in 2024.
Kevin Daly, portfolio manager for emerging debt at Aberdeen Investments in London, said there was a lack of transparency around the exact terms of the agreement with official creditors.
“It doesn’t necessarily mean that we are going to have an improved environment in terms of negotiating with Eurobond creditors,” said Daly.
The Ethiopia Ad Hoc Bondholder Committee did not respond to a request for comment.
Ethiopia’s Official Creditor Committee (OCC) is co-chaired by France and China. The Paris Club of creditor nations, which usually handles communications for Ethiopia’s OCC, did not respond to a request for comment.
When Ethiopia, which is Africa’s second most populous nation after Nigeria, completes the process, it will join Ghana, Zambia and Chad, who all restructured under the Common Framework.
Ethiopian officials have said they expect to sign a definitive deal with the official creditors by the middle of this year, which will then be implemented through bilateral agreements with each member of the official creditor committee.
Ethiopia’s international bond stood unchanged at 85.8 cents in the dollar, according to Tradeweb data.
However, it has rallied steadily in recent months, and is well above the 70 cents threshold at which it last traded in May and below which debt is considered distressed.
(Reporting by Dawit Endeshaw in Addis Ababa and Duncan Miriri in Nairobi; Writing by Hereward Holland; Editing by Toby Chopra, Karin Strohecker and Andrew Heavens)
