Ethiopia's debt restructuring process has hit a major roadblock as the official creditors committee rejected restructuring agreements with bondholders and commercial creditors for failing to meet comparability of treatment requirements.
The committee, co-chaired by China and France, rejected an agreement in principle reached between the Ethiopian government and holders of its $1 billion Eurobond obligation in January, arguing the terms were not fair to other creditors also pursuing debt treatment with Ethiopia.
The rejected January agreement included terms for a 15% haircut, a new $850 million bond maturing in 2029, and a $350 million principal repayment due in July 2026, according to The Reporter Ethiopia. The official creditors committee determined these terms did not satisfy comparability of treatment (CoT) requirements — the principle that all creditor classes should receive similar treatment in debt restructuring.
Comparability of treatment is a cornerstone of the G-20 Common Framework, requiring that private creditors provide debt relief on terms comparable to what official bilateral creditors offer. This prevents any single creditor group from receiving preferential treatment that would undermine the overall restructuring effort.
A report presented at the IMF-World Bank Spring Meetings in Washington, DC this week noted that negotiations with bondholders remain pending. However, it revealed that an agreement in principle has been reached with "one large commercial creditor on terms assessed as meeting CoT requirements," suggesting some progress in aligning private sector deals with official creditor standards.
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The setback comes as Ethiopia's credit rating remains in default status after the government failed to service a $33 million coupon payment in December 2023, according to the official creditors committee report. This missed payment triggered the default classification that has complicated the country's access to international capital markets.
Earlier this month, the Ethiopian Ministry of Finance said it had reached a debt treatment agreement with China, Ethiopia's largest bilateral creditor. However, similar deals with other creditors and bondholders remain elusive, creating an uneven restructuring landscape that complicates the comparability assessment.
Finance Minister Ahmed Shide attended the Spring Meetings and participated in the Global Sovereign Debt Roundtable, where he provided updates on Ethiopia's debt restructuring efforts and called for continued constructive engagement from both official and private creditors, alongside sustained support from international financial institutions to maintain reform momentum and support economic recovery.
Ethiopia's debt restructuring challenges highlight the complexity of the G-20 Common Framework process, which aims to provide a coordinated approach to sovereign debt treatment. The framework requires careful balancing between official bilateral creditors, multilateral lenders, and private sector bondholders to ensure equitable treatment across all creditor classes.
