Ethiopia will not implement its $1 billion Eurobond debt restructuring agreement reached with private bondholders earlier this month, the Ministry of Finance announced. The Official Creditor Committee (OCC) has rejected the deal, stating it violates principles of fair burden-sharing among creditors. This decision prioritizes consistency with official debt relief terms to safeguard macroeconomic stability.
Ethiopia has decided against proceeding with a $1 billion Eurobond debt restructuring agreement it reached in principle with an ad hoc committee of private bondholders at the start of the month. The deal pertained to the 6.625% Eurobond maturing in 2024, under which bondholders agreed to a 15% principal haircut, reducing the repayment to about $850 million in new bonds starting in 2026, plus an upfront payment of $350 million due by July this year.
The Official Creditor Committee (OCC), co-chaired by China and France, rejected the agreement in an official letter, deeming the relief provided to private creditors “significantly lower” than the concessional terms already offered by bilateral and multilateral lenders. This violates the “Comparability of Treatment” standard outlined in the July 2025 Memorandum of Understanding between Ethiopia and its official creditors.
The Ministry of Finance stated that implementing the deal would jeopardize the country's macroeconomic stability and economic growth progress. Ethiopia relies on a $3.4 billion IMF program, which aims to reduce debt distress to a moderate level; any perceived favoritism toward private creditors could lead the IMF to delay or suspend disbursements, threatening reforms and access to foreign financing.
Consequently, the government will renegotiate the terms with the bondholders' committee. The ministry expressed regret over reopening talks but remains committed to a resolution. Future negotiations may require deeper concessions from private investors, such as a larger principal haircut, lower interest rates, and extended maturities.
For bondholders, who have awaited repayment since the bond's default in late 2023, this represents a setback, prolonging uncertainty and potential market devaluation. The government, however, prioritizes alignment with official creditors and the IMF to ensure long-term debt sustainability over short-term private market appeasement.
