Ethiopia, one of Africa's second most populous countries, has become the third nation on the continent to default on its international government bond in the past three years.
On Tuesday, Ethiopia failed to make a $33 million "coupon" payment on its sole international bond, officially declaring its intention to go into default.
The country has been grappling with significant financial challenges due to the impact of the COVID-19 pandemic and a two-year civil war that concluded in November 2022.
Originally, the payment was expected to be made on December 11, but the bond's terms allowed for a 14-day grace period, extending the deadline until Tuesday.
However, as of the end of Friday, December 22, the coupon payment had not been made to bondholders, marking the widely anticipated default.
The default puts Ethiopia in the company of two other African nations, Zambia and Ghana, as participants in a comprehensive debt restructuring program known as the "Common Framework."
In a statement issued last week, Ethiopia's Ministry of Finance explained its decision to withhold the December coupon payment on its Eurobond.
Despite the relatively affordable amount involved, the ministry aimed to promote fairness and equal treatment for all external creditors.
The action is specifically intended to seek comparable arrangements for Ethiopia's outstanding Eurobond before the implementation of the Common Framework, according to the Finance Ministry.
Ethiopia had initially sought debt relief under the G20-led initiative in early 2021. However, progress was hindered by the civil war.
With foreign exchange reserves depleted and inflation soaring, the country's official sector government creditors, including China, agreed to a debt service suspension deal in November.
Parallel negotiations with pension funds and other private sector creditors holding the bond broke down on December 8. Credit ratings agency S&P Global downgraded the bond to "Default" on December 15, assuming that the coupon payment would not be made.