(Bloomberg) — Ethiopia became the latest African country to default after failing to pay interest after a grace period ended Monday.
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This country in the Horn of Africa had to pay a coupon of $33 million on December 11. The government did not want to make the payment because it “wants to treat all creditors the same,” said Ahmed Shide, Ethiopia’s finance minister. state television on Thursday.
Hinjat Shamil, senior reform adviser at the Finance Ministry, confirmed on Monday that the payment had not been made and will not be made. Ethiopia reached an agreement with its bilateral creditors last month to suspend debt payments.
The default places Ethiopia among a growing number of developing countries that have defaulted on their Eurobonds in recent years, including Zambia, Ghana and Sri Lanka.
Read more: Ethiopia says ‘affordable’ bond payment was withheld on equality grounds
In its restructuring counterproposal, the government asked bondholders to extend the amortization maturity from July 2028 to January 2032 and reduce the coupon to 5.5% from the current 6.625%. However, the face value must remain at $1 billion, meaning creditors will not need to swallow a so-called haircut on their holdings.
An ad hoc committee of bondholders said earlier this month that it viewed the decision not to make the payment as “both unnecessary and unfortunate.”
Ethiopia is seeking to renegotiate its obligations through the Group of 20 Common Framework, which began to gain momentum after Zambia and Ghana made progress in restructuring their debts. This helps coordinate debt relief from public and private lenders, to set standards for debt treatment.
The country has reached an agreement in principle with its bilateral creditors to suspend debt payments, after seeking to rework its debts since 2021 as a civil war in the northern Tigray region impaired investor confidence and undermined Economic Growth.
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