Following the failure of fresh negotiations regarding the restructuring of Ethiopia’s $1 billion Eurobond debt, international creditors have announced that they will proceed with legal action against the Ethiopian government.
According to a statement issued by the creditors’ committee, they have rejected the government’s newly proposed debt restructuring option. However, the creditors stated that they remain open to discussions if a better alternative is presented. Meanwhile, a group representing certain members has decided to take the matter to a UK court to file a lawsuit in order to enforce their rights, affirming the pre-action warning previously issued in April.
It is recalled that at the end of 2023, Ethiopia was recorded as having “defaulted” on its debt in the international financial market after failing to make a Eurobond interest payment. Although the country has been negotiating with investors since then, the revised debt restructuring proposal presented last week failed to gain acceptance among creditors.
While the committee stated that the government’s newly revised proposal does not contain a viable solution that could lead to an agreement, the Ethiopian Ministry of Finance, for its part, released an official statement last week providing a detailed explanation on the matter.
The Ministry had stated that the restricted negotiation period held with the creditors’ committee from May 6 onwards concluded without an agreement, leading to a suspension of the talks. The Ministry recalled that these negotiations represented a new phase that followed the rejection of a preliminary agreement—reached between Ethiopia and its creditors last January—by the Official Creditor Committee (OCC) co-chaired by France and China.
The preliminary agreement reached last January was rejected by the bilateral creditors (OCC) because the “Value Recovery Instrument” contained within it—which allows for additional payments based on the country’s future macroeconomic growth—was deemed to violate the principle of “comparability of treatment.”
In its statement, the Ministry of Finance expressed disappointment over the investors’ decision, but noted that Ethiopia remains committed to seeking a market-based solution that aligns with the International Monetary Fund (IMF) program and the principle of “comparability of treatment.”
