Ethiopia asks bondholders for debt relief early, ‘likely once and for all’

ADDIS ABABA (Reuters) -Ethiopia’s finance ministry said on Friday it had asked its international bondholders to offer early debt relief that does not have to be renegotiated over “comparability of treatment concerns” as it faces a sovereign default later in December.

The plea was made during a global investor call on Thursday as Ethiopia made an eleventh hour push to resuscitate an overhaul of its $1 billion Eurobond, after disclosing on Dec. 8 that it had failed to reach an agreement with a core group of bondholders.

“Ethiopia’s strategy… is to invite bondholders to contribute early – and likely once and for all – to the resolution of its debt issue,” the east African country’s finance ministry said in a statement published on the social media platform X, formerly known as Twitter.

Africa’s second-most populous country is headed for default after it did not make a $33 million coupon on the Eurobond which had been due on Dec.11. There is a 14-day grace period on the payment.

Ethiopia requested debt relief under the G20’s Common Framework in early 2021, but progress was initially delayed by a two-year civil war that ended in November 2022 and it is suffering from foreign exchange shortages and high inflation.

It said it aimed to minimise the risk of a deal having to be revisited due to “concerns over comparability of treatment”.

“The Ministry of Finance recognizes the risks bondholders would take in subscribing to this approach and conveyed its readiness to discuss possible mitigants,” it said.

This included “a loss reinstatement provision that would essentially reinstate bondholders in their previous position should Ethiopia be required to renegotiate the terms of the agreement in the next two years to ensure comparability of treatment.”

“Comparability of Treatment” is a principle originating from the Paris Club of wealthy creditor nations that aims to ensure its members don’t give outsized concessions compared to private lenders or others outside the group.

Objections from Zambia’s official creditors, including China, in November derailed a debt rework deal that the southern African country had reached with its bondholders over “comparability of treatment”.

Ethiopia agreed a debt service suspension with its official creditors including China ahead of negotiating more debt relief with them.

The finance ministry said Monday’s interest payment had been “an affordable amount”, but that it had decided to withhold the payment because it wanted to treat its creditors equitably.

(Reporting by Dawit Endeshaw and Rachel Savage, Editing by Joe Bavier, Karin Strohecker and Sharon Singleton)