The $1 billion debt restructuring talks between the Ethiopian government and bondholders have collapsed, extending Addis Ababa’s absence from international financial markets.

Ethiopia’s Finance ministry said the talks on the terms of a potential restructuring of the $1 billion bond priced at 6.625 percent failed to yield a consensus, and the parties agreed to terminate them.“The discussions did not result in a final agreement between the parties. The parties have jointly decided to terminate the restricted discussions without reaching a final agreement on the terms of a potential restructuring of the 2024 notes,” the government said in a statement dated October 14.“Ethiopia would like to thank the Ad Hoc Committee and the Ad Hoc Committee’s advisers for the constructive nature of their engagement and their openness and availability throughout these restricted talks.”

“While a final agreement on terms could not be achieved this time, Ethiopia believes that substantial progress was achieved and hopes that discussions will resume with the Ad Hoc Committee and its advisers in the foreseeable future to bridge the remaining gap between the Parties,” the Finance ministry said.“Ethiopia intends to continue its good faith engagement with all its creditors, including the Ad Hoc Committee, and commits to engage its Official Creditor Committee and the IMF to explore potential options to bridge the remaining gaps between the parties.”Throughout the period of negotiations, Ethiopia strongly reiterated its commitment to the comparability of treatment principle.

Ethiopia's debt has been deemed unsustainable, partly due to a default on a $33 million Eurobond coupon payment in December 2023.“We note that in addition to the financial terms set out in enclosures, the Ad Hoc Committee’s proposals also included certain non-financial terms. While these were not formally addressed as part of the restricted discussions, Ethiopia acknowledges that in addition to financial terms, agreement on non-financial terms will also form part of any future restructuring of the 2024 notes.”The deadlock on bond restructuring negotiations comes as at a time when Ethiopia is restructuring its loans under the Group of 20 Common Framework, which requires official creditors to agree on relief terms before private lenders can be offered comparable deals.

The process requires borrower governments to seek at least as much debt relief from private creditors to that provided by official bilateral creditors.

The common framework launched in 2020, is designed to bring different lenders to poorer countries under one roof -- particularly China, whose lending surged in the decade before the Covid-19 pandemic.

Although the framework was regarded as a breakthrough, the length of the process for Ethiopia and the other main test cases— Zambia and Ghana— has led to complaints of delays and complexity from governments and creditors alike.

Ethiopia’s Eurobond was issued in 2010 and was due in 2024. Addis in December 2023 missed a $33 million interest payment — the continent’s largest sovereign default at that time.

It included further details in relation to the International Monetary Fund/World Bank macro-economic framework for the Second and Third Review of Ethiopia’s Extended Credit Facility, in particular details in relation to Ethiopia’s public debt stock that was originally included in the IMF’s Debt Sustainability Analysis (DSA) perimeter, broken down by creditor and debtor category, associated pre-restructuring debt service schedules, comparability of treatment indicators and actual exports performance for fiscal year 2024/2025.

The Ad Hoc Committee did not accept Ethiopia’s Initial Proposal and, in return, shared its own proposals.

Early in September, National Bank of Ethiopia Governor Mamo Mihretu left in unclear circumstances, barely three years since assuming the position, saying he was leaving the government to pursue other “passions” and tackle other challenges.

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