ADDIS ABABA — Ethiopia has paused its long-awaited Eurobond restructuring after official creditors ruled that the government’s agreement with private bondholders does not meet international standards on burden sharing — dealing a setback to one of the country’s most consequential sovereign debt negotiations.
On 29 January, the Ministry of Finance said it could not proceed with the restructuring terms agreed earlier that month with an ad hoc committee of holders of Ethiopia’s US$1 billion 6.625% Notes due 2024, after the Official Creditor Committee (OCC) found the deal noncompliant with the Comparability of Treatment principle.
The principle requires private creditors to provide debt relief comparable to what bilateral and multilateral lenders offer under the G20 Common Framework. Ethiopia entered that process in 2023 as it struggled with external financing pressures, inflation, and foreign exchange shortages.
Official Creditors Reject the Deal
In a formal letter dated 28 January, the OCC acknowledged Ethiopia’s engagement but raised concerns about the depth of relief being offered by bondholders.
“After careful consideration of the AIP, the OCC considers that it is not compliant with the principle of comparability of treatment and the Memorandum of Understanding agreed with Ethiopia,” wrote the committee’s co-chairs, Yang Jing and Thomas Revial, to Finance Minister Ahmed Shide.
The OCC argued that Ethiopia’s improving macroeconomic outlook risked allowing bondholders to escape meaningful losses. “In light of the favourable macroeconomic perspectives, the OCC deems that the implementation of the AIP is likely to result in a very low restructuring effort from the bondholders, in breach of the comparability of treatment principle,” the letter said.
Warning Against Value Recovery Instruments
Creditors also warned against the use of value recovery instruments — mechanisms that link future payments to economic performance. The OCC said such tools “can significantly add complexity to the assessment of comparability of treatment, and carries the risk of vastly diverging efforts.”
The warning reflects broader concerns among official creditors about the structure of sovereign debt deals that could effectively reduce the burden on private bondholders while official lenders absorb deeper losses.
Addis Ababa Halts Implementation
Addis Ababa responded by halting implementation of the January deal. “In light of this assessment, Ethiopia is not in a position to proceed with implementation of the Eurobond restructuring terms outlined in the AIP,” the Ministry of Finance said, noting that doing so would conflict with the framework agreed with official creditors in July 2025.
Officials also framed the decision as a macroeconomic safeguard. Proceeding, the ministry said, “would pose risks to the macroeconomic stability and economic progress that Ethiopia has worked hard to achieve.”
The Path Forward
The government confirmed it will re-engage with the ad hoc committee of bondholders to revise the financial terms of the restructuring.
Ethiopia says it remains committed to reaching a market-acceptable solution that also satisfies official lenders and the IMF. Any new deal, the ministry said, must ensure fair burden sharing among Ethiopia’s creditors, remain compatible with IMF programme commitments, and secure broad investor support.
The halt underscores the complexity of sovereign debt restructuring under the G20 Common Framework — a process that has proven slow and contentious for several African economies navigating post-pandemic financing pressures. For Ethiopia, resolving the Eurobond impasse remains a prerequisite for restoring full access to international capital markets.