Ethiopia’s two-year effort to resolve its sovereign debt crisis deepened on Thursday after international bondholders rejected a revised restructuring proposal and three weeks of formal negotiations ended without agreement.
Ethiopia’s finance ministry confirmed that a group of holders of its $1 billion international bond, due in 2024, had rejected a revised restructuring proposal during formal talks held between May 6 and 27.
The government’s latest offer proposed that bondholders accept a 12 percent loss on the defaulted debt, but the Ad Hoc Committee of institutional investors rebuffed the terms, drawing out a default that has persisted since December 2023.
The rejection is the latest in a series of breakdowns that have repeatedly derailed what was once considered a near-complete process. In January, Ethiopia reached a preliminary restructuring deal with bondholders, but bilateral official creditors co-chaired by France and China said the agreement did not meet the Comparability of Treatment principle, which mandates that a country seek similar debt relief terms from all its creditors. That forced the government to revise the proposal, which official creditors then approved and presented to bondholders in the latest round of talks.
The Ad Hoc Committee has warned it plans to take legal action, a step that could significantly complicate Ethiopia’s path back to international capital markets.
Ethiopia had set an October 2026 deadline to finalise all bilateral and commercial debt restructuring agreements, describing it as a critical concluding phase in the country’s effort to achieve macroeconomic stability under the G20 Common Framework. Thursday’s collapse puts that timeline in serious doubt.
The government remains backed by a $3.4 billion International Monetary Fund (IMF) programme, but continued disbursements depend on reaching a comprehensive debt deal that satisfies all creditor groups on comparable terms. With bondholders and official creditors still far apart on the scale of required writedowns, the prospect of a negotiated resolution before the year ends has grown considerably more uncertain.
