The Lower Eastern Times Opening The Third Eye
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On Tuesday, Ethiopia officially became the third African nation to default in the past three years, as it failed to fulfill a $33 million “coupon” payment on its sole international government bond. The country, which is the second most populous in Africa, had previously announced its intention to declare formal default earlier this month. The decision was prompted by significant financial challenges exacerbated by the impact of the COVID-19 pandemic and a two-year civil war that concluded in November 2022.
While the payment was originally due on December 11, Ethiopia technically had until Tuesday to deliver the funds, thanks to a 14-day ‘grace period’ clause embedded in the $1 billion bond. Sources familiar with the matter revealed that bondholders had not received the coupon payment as of the end of Friday, December 22, which was the final international banking working day before the grace period lapsed.
Despite requests for comment, Ethiopian government officials remained silent on Friday and over the weekend. The widely anticipated default will now align Ethiopia with two other African nations, Zambia and Ghana, in undergoing a comprehensive restructuring under the “Common Framework.”
Ethiopia had initially sought debt relief under the G20-led initiative in early 2021. Progress was initially impeded by the civil war, but with dwindling foreign exchange reserves and surging inflation, the country’s official sector government creditors, including China, agreed to a debt service suspension deal in November. However, on December 8, the government announced a breakdown in parallel negotiations with pension funds and other private sector creditors holding its bond. Subsequently, credit ratings agency S&P Global downgraded the bond to “Default” on December 15, anticipating the non-payment of the coupon.
