Ethiopia Bondholders Express Disappointment Over Proposed 20% Haircut on $1 Billion Eurobond

Addis Ababa, Ethiopia –Ethiopia's recent proposal to impose a 20% haircut on its $1 billion Eurobond has sparked frustration among foreign bondholders, who argue that the move contradicts the country's economic potential.

The creditor group, which collectively holds over 40% of the bond, expressed disappointment over the government's handling of the situation, emphasizing that the proposed reduction is inconsistent with their assessment of Ethiopia's financial stability. The bondholders are now calling for greater transparency and a more collaborative approach to the debt restructuring process.

Since defaulting on the bond in December 2022, Ethiopia has struggled to make meaningful progress in restructuring its debt.

The government's surprise announcement to reduce the bond's principal to $800 million, citing the need to align with debt relief offered by official creditors, has further complicated negotiations.

With the bond now trading at 77 cents on the dollar, the situation has raised concerns among investors about the future of Ethiopia's financial obligations and its overall economic trajectory.

Despite securing a $3.4 billion financing program from the International Monetary Fund (IMF) in July, the Ethiopian government has yet to provide clarity on its restructuring plans.

The IMF, which did not comment on the proposed haircut, has set criteria for good faith negotiations, including timely dialogue and transparency. However, the lack of communication from Ethiopian officials has left bondholders uncertain about the path forward, with many questioning the viability of the government's current approach.