Ethiopia announced on Tuesday that its debt restructuring negotiations with international bondholders had ended without an agreement, citing persistent differences over key terms.
The East African nation defaulted on its only international bond in late 2023 after seeking relief under the G20’s Common Framework, which requires comparable treatment between official and commercial creditors.
Although Addis Ababa described the outcome as a setback, it said “substantial progress” had been achieved and expressed hope that discussions would resume “in the foreseeable future.” The key sticking point reportedly centres on whether the restructuring should include a reduction of the bond’s principal, commonly known as a haircut.
To break the stalemate, bondholders had proposed a “Value Recovery Instrument,” an additional bond allowing them to recover losses if Ethiopia’s exports perform strongly in the coming years. However, the bondholders’ committee said it was disappointed by the failure of the talks and noted it had not been given access to Ethiopia’s deal with official sector lenders. The committee said it would consider all options, including legal action, declaring that “negotiations have reached an impasse.” Following Tuesday’s announcement, Ethiopia’s defaulted bond dropped by one cent to 95 cents on the dollar — still near its highest level since early 2021.