Ratings agency S&P Global expects Ethiopia could finalize an agreement with the International Monetary Fund (IMF) by the first quarter of 2024. However, S&P noted that full disbursements by the IMF would require financing assurances from Ethiopia's official bilateral creditors.
On December 15, S&P downgraded Ethiopia's long-term foreign and local currency ratings to 'SD/SD' (selective default), reflecting the missed payment on a $33 million Eurobond coupon on December 11. S&P also lowered the rating on the specific Eurobond issue to 'D' (default).
In downgrading Ethiopia's sovereign ratings, S&P cited delays in finalizing an IMF support program as adding strain to the country's fragile external position. Reaching a staff-level deal with the IMF is a condition for recently negotiated suspensions of official debt service from major Paris Club creditors to take full effect over 2023-2024, S& P said.
Two days prior, Fitch downgraded Ethiopia's sovereign rating further into default territory after the country failed to make the coupon payment within a 14-day grace period. Fitch lowered the Long-Term Foreign-Currency Issuer Default Rating to 'C' from 'CC', warning of imminent default.
The ratings actions by S&P and Fitch follow Ethiopia's default on the $33 million Eurobond payment earlier in December. Both agencies highlighted liquidity pressures from upcoming debt obligations.
While downgrading foreign currency ratings, S&P maintained Ethiopia's local rating at CCC/C as the missed payment only impacted external commercial debt. Authorities are seeking comparable restructuring terms for external bonds and official bilateral debt.
Ethiopia has faced sizable debt repayments, low reserves, and delays finalizing an IMF program amid ongoing conflict in the country’s north.