Ethiopia's Ministry of Finance says it has decided to withhold the December coupon payment on its Eurobond, despite the relatively affordable amount involved, as a part of its efforts aimed at promoting fairness and equal treatment for all external creditors.
Today, the Ministry released an official statement emphasizing its commitment to equitable treatment and called for comparable arrangements regarding its outstanding Eurobond, even before the implementation of the Common Framework. The goal is to ensure consistency and preserve ongoing discussions with other external lenders regarding the matter.
As part of its efforts to provide updates on the country's macroeconomic developments and engagement with development partners, the Ministry of Finance of Ethiopia conducted a global investor call.
During the call, State Minister Eyob Tekalign presented Ethiopia's strategy and extended an invitation to bondholders to contribute to the resolution of the debt issue in its early stages. This approach would allow bondholders to hold a performing instrument and receive payments while the Common Framework process unfolds, according to the Ministry.
Ethiopia recently obtained a two-year debt relief from its Paris Club creditors, resulting in savings of $1.5 billion in debt servicing. China, on the other hand, is still assessing how other creditors are handling Ethiopia's debt relief request and has yet to suspend debt payments.
In the meantime, Ethiopia failed to make a $33 million interest payment due on December 11th for its $1 billion Eurobond maturing in 2024.
The Finance Ministry has clarified that this action is specifically aimed at seeking comparable arrangements for its outstanding Eurobond prior to the implementation of the Common Framework.
The Ministry's intention is to maintain consistency and avoid jeopardizing ongoing discussions with other external lenders.
To address concerns regarding the comparability of treatment and ensure compliance with the Debt Sustainability Analysis, Ethiopia has proposed parameters for debt treatment that aim to minimize concessions from Eurobond holders.
The Ministry of Finance however acknowledged the risks bondholders would assume and has expressed a willingness to explore potential mitigating measures. This includes a loss reinstatement provision that would restore bondholders to their previous position if renegotiation becomes necessary within the next two years.
