Ethiopia's negotiations to restructure over one billion dollars in sovereign debt have stalled after international bondholders rejected the government's proposal for a 20 percent reduction in the principal owed.
In a statement, a group representing more than 40 percent of creditors said they were disappointed by signals from Addis Ababa that it may slash 200 million dollars from the debt load. The creditors argued such relief did not align with their own analysis of Ethiopia's economic circumstances.
In unusually direct language, the bondholders called on Ethiopia to adopt a more collaborative approach in the negotiations. According to estimates from the International Monetary Fund, Ethiopia's external debt totals 28.9 billion dollars as of June. Nearly half of that is owed to institutions like the World Bank and African Development Bank.
For Ethiopia, home to over 120 million people, resolving its debt is crucial for economic stability as it works to recover from domestic conflicts and the global pandemic. Some relief came in July via a 3.4 billion dollars IMF program and 16 billion dollars from the World Bank. But restructuring its bonds remains a key hurdle.
The government had said it hoped the restructuring would achieve 4.9 billion dollars in total debt relief from repayments once a deal is finalized with all creditors. However, completing an agreement has been long delayed.