Ethiopia has reached a preliminary agreement with key holders of its defaulted 2024 Eurobond, a significant step in its long-running debt restructuring process.
The draft deal, struck with a group of investors holding part of Ethiopia’s $1 billion international bond, outlines the main financial terms of a proposed restructuring, according to a statement from the Ministry of Finance. The agreement-in-principle marks the most tangible progress yet in negotiations that have dragged on for months following the country’s default.
However, Ethiopian authorities said consensus is still needed on the non-financial features of the new debt instrument intended to replace the defaulted bonds. These outstanding issues must be resolved with the Ad Hoc Committee of bondholders before the process can advance.
The ministry said the proposed terms have already been shared with the International Monetary Fund and Ethiopia’s Official Creditor Committee (OCC) for review.
“The terms of the Agreement in Principle have been communicated to the OCC for their non-objection as well as to the IMF to ensure compliance with Ethiopia’s long-term debt sustainability,” the statement said.
Ethiopia defaulted on its sole international bond in late 2023 after failing to make a scheduled payment, becoming the second African country in recent years to do so after Zambia.
The move followed mounting pressure on foreign exchange reserves and public finances, compounded by the economic fallout from internal conflict, global inflation shocks, and tighter global financial conditions.
A slow path under the Common Framework
After the default, Ethiopia opted to seek debt treatment under the G20 Common Framework, which requires comparable treatment across all creditor classes — including bilateral lenders, Eurobond holders, and other commercial creditors. While designed to bring order to sovereign restructurings, the framework has been widely criticised for its slow pace.
Progress with private creditors lagged even after Ethiopia reached a breakthrough with bilateral lenders. In July 2025, the government finalised a restructuring agreement with official creditors, a deal the finance ministry said would deliver more than $3.5 billion in cashflow relief and pave the way for negotiations with bondholders.
Formal talks with Eurobond investors eventually took place between December 23, 2025, and January 1, 2026. The ministry said the Ad Hoc Committee involved in the discussions represents institutional investors holding more than 45% of the 2024 Notes, giving the group significant leverage in the restructuring process.
Ethiopia now aims to implement the restructuring of the 2024 bonds through an exchange offer and/or a consent solicitation as early as possible in 2026. Market participants say the timeline will depend heavily on approvals from official creditors and the IMF, as well as on agreement on governance and legal terms for the new instrument.
For investors, the tentative deal signals momentum but not closure. Until all creditor groups align, Ethiopia’s return to international capital markets remains on hold — and its restructuring will continue to be closely watched as a test case for the G20 Common Framework in Africa.
