Ethiopia's Bold Move: Restructuring a $1 Billion Bond to Reinvent Its Economy

Ethiopia is undertaking a significant debt restructuring, aiming to address its $1 billion international bond amid foreign currency shortages and sluggish government revenues. The process, initiated in early 2021, involves tense negotiations with bondholders, who are wary of proposed haircuts. The country's strategy includes securing an IMF loan and implementing further economic reforms.

Ethiopia is accelerating its efforts to restructure its $1 billion international bond as part of a comprehensive debt overhaul. The government has signaled a need for a haircut, leading to potentially intense negotiations with investors.

The East African nation, grappled with foreign currency shortages and lagging government revenue due to a civil war in Tigray, announced in early 2021 its intention to restructure its debt under the G20 Common Framework. The drawn-out process, exacerbated by the conflict, saw substantial delays in meeting IMF requirements. However, with the birr floated on July 29 and a $3.4 billion IMF loan secured, Ethiopia is progressing towards debt restructuring.

Bondholders have expressed discontent, arguing the proposed 20% write down on the bond principal does not align with Ethiopia's economic realities. Diverging assessments on whether Ethiopia's issue is one of liquidity or solvency might further complicate the negotiations.

(With inputs from agencies.)