Ethiopia's Finance Ministry, in closed-door talks with major holders of $1 billion in international bonds, told them it would be unable to pay interest on $33 million in bonds due December 11. This nonpayment could potentially trigger a default, local media said, citing the ministry's statement.
"Unfortunately, in the short time available between commencement of discussions and the upcoming interest payment date, an agreement [...] could not be reached," the MoF reportedly said.
The government explained the default with a "fragile external position, with significantly lower foreign exchange reserves," which "inevitably affects the Ministry of Finance's ability to service inherent external borrowings."
The ministry also announced plans to hold a teleconference this week with global investors on the Eurobond proposal. The proposal includes pushing back the 2024 repayment date, reducing the coupon rate, and adjusting interim payments.
The committee said it had been given a "very short notice" to begin negotiations and believed the government had presented the decision not to make the payment "as a fait accompli," leaving little room for negotiation.
Ethiopia requested a debt renegotiation under the Common Framework created by G20 countries in response to the COVID-19 pandemic in early 2021. In November, Addis Ababa said it had reached an agreement in principle with bilateral creditors to temporarily suspend debt payments and planned to begin talks to restructure its $1 billion Eurobond due next year.
Late last month, Ethiopia reached an agreement with creditors to suspend debt service on $1.5 billion of debt, the country's central bank governor said.
Other African nations, Zambia and Ghana, have resorted to similar negotiations after defaulting on external loan repayments in 2020 and 2022, respectively.