•The Agreement Comes Without Debt Write-Down
•Restructuring Agreement Offers Temporary Relief but Highlights Deeper Financial Challenges
Ethiopia has secured additional time to repay its mounting sovereign debt under a preliminary restructuring agreement with its official creditors, though the deal stops short of reducing the overall debt burden.
The announcement, made by William Roos, co-chair of the Official Creditor Committee (OCC), signals a significant step toward addressing the East African nation’s ongoing debt crisis, which culminated in a default in December 2023.
The agreement, which is expected to be finalized within the coming months, covers approximately $8.4 billion in debt and provides Ethiopia with an estimated $2.5 billion in debt service relief through 2028.
The terms are closely aligned with the fiscal path outlined under Ethiopia’s International Monetary Fund (IMF) program, which is aimed at restoring macroeconomic stability and guiding the country back to sustainable growth.
“We reduce the stock of debt through an extension of maturities,” said Roos, who represents France on the OCC and co-chairs the committee alongside China.
He further clarified that the arrangement specifically alleviates payment pressure during the IMF program period, offering breathing space for Ethiopia’s fragile economy.
Despite the relief, the restructuring will not involve a write-down or “haircut” on the principal debt owed to official creditors.
This approach reflects the view held by some OCC members that Ethiopia’s financial difficulties are primarily liquidity-driven rather than a symptom of fundamental insolvency.
However, Roos acknowledged that the country’s challenges are more complex, involving both short-term cash flow constraints and longer-term debt sustainability issues.
The debt renegotiation is being conducted under the G20 Common Framework for Debt Treatments—a platform designed to facilitate coordinated debt relief for low-income countries.
However, Ethiopia continues to face headwinds in parallel negotiations with private bondholders, particularly concerning its $1 billion Eurobond due in 2024.
Bondholders have rejected Ethiopia’s proposed 18% haircut, arguing that the IMF’s debt sustainability analysis underestimates the country’s export revenues, particularly by undervaluing gold and coffee exports.
These objections have stalled progress on a comprehensive settlement and raised concerns over Ethiopia’s access to international capital markets in the future.
While the OCC agreement marks a milestone, the broader restructuring process remains incomplete.
Roos highlighted the constructive collaboration between OCC co-chairs France and China, both of whom played pivotal roles in steering negotiations.
However, not all creditor nations are participating under the Common Framework. The United Arab Emirates, Kuwait, and Poland have chosen to negotiate repayment terms separately, adding further complexity to the resolution process.
Ethiopia’s path to economic recovery remains uncertain, as the country balances pressing humanitarian needs, post-conflict reconstruction efforts, and structural reforms required under its IMF-backed program.
While the extension of maturities provides short-term relief, analysts warn that without broader consensus—including from private creditors—the country may continue to face financing gaps and economic vulnerability in the years ahead.
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