Ethiopia’s official creditors have agreed to a draft debt restructuring plan, offering the nation more time for repayments.
This deal, however, will not include an outright reduction of the principal debt.
The agreement, expected to be finalized within months, aims to provide approximately $2.5 billion in debt service relief.
This relief will be implemented throughout Ethiopia’s current International Monetary Fund (IMF) program, which concludes in 2028.
William Roos, co-chair of Ethiopia’s Official Creditor Committee (OCC), stated that the restructuring will extend payment maturities and lower debt service during the IMF program.
Interest levels will also be reduced, effectively lowering the debt stock’s net present value without a haircut.
Ethiopia defaulted in December 2023 and reached a preliminary agreement with the OCC in March to restructure $8.4 billion in debt.
The restructuring occurs under the G20 Common Framework, designed to expedite debt treatments for struggling nations.
Ethiopia is currently in disagreement with its Eurobond holders, who argue the country faces a liquidity issue rather than a need for debt reduction.
Bondholders have rejected Ethiopia’s proposal for an 18% haircut on their holdings.
Roos affirmed the IMF’s assessment of Ethiopia’s debt sustainability, emphasizing that the nation’s challenges extend beyond short-term cash flow problems.
He also noted the “very constructive” cooperation with China, the other co-chair of the OCC.
