Ethiopia 'formalises debt rework' with official creditors

Ethiopia said on Wednesday it had agreed a memorandum of understanding with its official creditor committee (OCC) that formalises an initial debt restructuring deal reached earlier this year.

The debt rework offers relief of more than $3.5bn (R61.29bn), the finance ministry said in a statement.

The Horn of Africa nation opted to restructure its external debt under the G20's Common Framework in 2021, before it defaulted on its sole Eurobond in December 2023. It hopes the formal agreement with its official creditors will help it seal deals with other creditors, such as its bondholders, the finance ministry said.

Ethiopia has been locked in a standoff with a group of investors in its $1bn (R17.51bn) Eurobond, which matured in 2024.

"Ethiopia continues to engage in good faith with all its other participating external creditors and seeks to conclude restructuring agreements on terms compatible with the country's need for debt relief and the comparability of treatment principle," said state finance minister Eyob Tekalign Tolina.

When Ethiopia announced the preliminary deal with its official creditors in March, it said the agreement would provide some $2.5bn (R43.78bn) of relief over 2023 to 2028, the period of its International Monetary Fund (IMF) programme.

Ethiopia's OCC is co-chaired by France and China. The Paris Club of creditor nations, which usually handles communications for Ethiopia's OCC, did not immediately respond to a request for comment.

The IMF's executive board is scheduled to meet on Wednesday to sign off on the latest review of its $3.4bn (R59.54bn) loan programme, which would trigger a payout on the next tranche.

The country's bonds stood unchanged at around 92 cents on the dollar, their highest level in four years, Tradeweb data showed. This is well above the 70 cents threshold below which debt is considered distressed and indicates that investors do not expect to suffer major writedowns.

Other African countries Ghana, Zambia and Chad have restructured their external debts under the Common Framework.

Reuters