(Bloomberg) — Ethiopia became Africa’s latest defaulter after failing to pay interest after a grace period ended on Monday.
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The Horn of Africa nation had to pay a $33 million bond on December 11. The government did not want to make the payment because it “wants to treat all creditors the same,” Ahmed Shide, Ethiopia’s finance minister, said on state television on Thursday.
Hijat Shamil, a senior reform adviser at the Treasury Department, confirmed on Monday that the payment had not and would not be made. Ethiopia reached an agreement with bilateral creditors last month to suspend debt payments.
The default places Ethiopia among a growing number of developing countries that have defaulted on Eurobonds in recent years, including Zambia, Ghana and Sri Lanka.
Read more: Ethiopia says ‘affordable’ bond payment withheld for equality
In its counterproposal for restructuring, the government has asked bondholders to extend the maturity for amortization from July 2028 to January 2032 and to cut the coupon to 5.5% from the current 6.625%. However, the face value will remain at $1 billion, meaning creditors will not have to take a so-called haircut on their holdings.
An ad hoc committee of bondholders earlier this month said it viewed the decision not to make the payment as “unnecessary and unfortunate.”
Ethiopia is seeking to renegotiate its obligations through the Group of 20 Common Framework, which has begun to gain momentum after Zambia and Ghana made progress in restructuring their debts. This allows for the coordination of debt relief by public and private lenders, to set standards for debt management.
The nation reached an agreement in principle with bilateral creditors to suspend debt payments, having sought to renegotiate its obligations from 2021 as civil war in the northern Tigray region rocked investment sentiment and dented the economy. development.
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