Ethiopia has officially joined the growing list of African nations facing financial distress as it failed to meet a crucial interest payment following the expiration of a grace period on Monday.
The Horn of Africa nation was slated to pay a $33 million coupon on December 11, a commitment it did not fulfill.
Ethiopia’s Minister of Finance, Ahmed Shide, announced on state television that the government’s decision not to make the payment was rooted in its commitment to treating all creditors uniformly.
This default places Ethiopia in the company of other African nations, including Zambia, Ghana, and Sri Lanka, that have faced challenges meeting their Eurobond obligations in recent years.
The government had previously reached an agreement with bilateral creditors to temporarily suspend debt payments, reflecting its struggle to manage financial obligations amidst economic challenges exacerbated by a civil war in the Tigray region.
In response to the default, an ad hoc committee of bondholders expressed disappointment, deeming the decision unnecessary and unfortunate.
Ethiopia’s proposal for debt restructuring involves requesting bondholders to extend the maturity period from July 2028 to January 2032 while reducing the coupon rate from 6.625% to 5.5%, with the face value remaining at $1 billion, thereby avoiding a haircut for creditors.
The nation is seeking to renegotiate its financial commitments through the Group of 20’s Common Framework, a mechanism that coordinates debt relief efforts from both public and private lenders.
Ethiopia’s financial challenges underscore the broader economic struggles faced by nations on the continent, as the government grapples with the aftermath of the Tigray conflict and endeavors to navigate a path to fiscal stability.