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Ethiopia Reaches Debt Restructuring Deal Following Long Default

The Ad Hoc Bondholder Committee representing holders of Ethiopia’s 2024 notes has reached an agreement-in-principle with the government to restructure its defaulted debt. The deal, which includes a new 880 million dollar bond maturing in 2029, concludes a contentious period of negotiation that has spanned over two and a half years.

Ethiopia Reaches Debt Restructuring Deal Following Long Default
Photo: Bio & News

The agreement aims to provide Ethiopia with necessary cash flow and debt relief to support its economic recovery under the current International Monetary Fund program. The proposal includes a new money warrant, allowing holders to subscribe to future bond allocations. While the IMF and the Official Creditor Committee have signaled they do not object to the terms, the process has exposed deep rifts between private creditors and international institutions.

Beyond the financial terms, the Committee issued a sharp critique of the current sovereign debt restructuring architecture. Bondholders argued that the IMF’s debt sustainability analysis was based on flawed projections, noting that Ethiopia’s actual export performance significantly outpaced the agency's estimates. The Committee contended that the country remained in default unnecessarily, hindering growth and harming its citizens. Despite the agreement, internal friction remains; Farallon Capital Management expressed reservations, suggesting the deal offers debt relief far beyond what is required to restore sustainability, though it will support the group's collective decision to ensure the committee remains functional.

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