Ethiopia will not implement the $1 billion Eurobond debt restructuring deal it agreed with private bondholders in early January, after the country’s Official Creditor Committee (OCC) formally rejected the terms as violating the principle of fair burden‑sharing among creditors.
The Ministry of Finance announced on Thursday that it cannot proceed with the restructuring under the current terms, because doing so would be inconsistent with the “Comparability of Treatment” principle that governs its debt relief with official creditors.
At the start of the month, the government reached an Agreement in Principle (AIP) with the Ad Hoc Committee of private holders of its $1 billion 6.625% Eurobond maturing in 2024. Under that deal, bondholders accepted a 15% haircut on the principal, leaving about $850 million to be repaid in new bonds starting in 2026, with an upfront payment of $350 million expected by July this year.
However, the OCC — co‑chaired by China and France — stated in an official letter that the relief offered by the private deal is “significantly lower” than the concessional terms already extended by bilateral and multilateral creditors. The committee found that the AIP does not meet the “Comparability of Treatment” standard laid out in the July 2025 Memorandum of Understanding between Ethiopia and its official creditors.
The Ministry of Finance warned that implementing the AIP as it stands would endanger Ethiopia’s macroeconomic stability and the progress made in restoring economic growth.
“Under these circumstances, implementing the agreement would pose a risk to the macroeconomic stability and economic growth that Ethiopia has registered,” the Ministry said, explaining that moving forward would be inconsistent with the official sector’s framework for debt restructuring.
Ethiopia is currently supported by a $3.4 billion IMF programme, which is premised on bringing the country’s debt distress to a “moderate” level. For the IMF to continue disbursements, any debt relief must be broad‑based and fair across creditor groups.
If the terms for private creditors were seen as too generous compared to official creditors, there is a high risk that the IMF would delay or suspend its support, potentially undermining the entire reform programme and the country’s access to external financing, including foreign exchange.
As a result, the government will now go back to the negotiating table with the Ad Hoc Committee of bondholders to revise the financial terms of the Eurobond restructuring.
The Ministry of Finance expressed regret over having to reopen talks but reaffirmed its commitment to reaching a solution.
Future negotiations are likely to demand deeper concessions from private investors, possibly including a higher principal haircut, lower interest rates, and longer repayment periods.
For bondholders, the decision is a setback. Many investors have been waiting for any sign of repayment since the bond defaulted in late 2023. The rejection of the AIP now means further uncertainty, potential further devaluation in the secondary market, and a longer wait for any substantive cash flows.
For the Ethiopian government, the message is clear: maintaining its relationship with the IMF and with official creditors comes first, even at the cost of disappointing the private market.
While private investors seek quicker repayment and higher returns, official creditors are focused on long‑term debt sustainability and the country’s ability to grow without being crushed by debt service.
Ethiopia’s next step will be to negotiate restructuring terms that give private creditors less than initially agreed — but enough to keep markets engaged, while fully aligning with the official sector’s vision of a fair and orderly debt resolution.
