Ethiopia’s debt restructuring negotiations with its bondholders has failed due to differences over key terms. Ethiopia, under the Abiy Ahmed regime, defaulted on its international bond in December 2023, and has been in financial limbo since then.
Despite failing to reach an agreement, “substantial progress” had been made, the Abiy regime said in a statement. Progress refers to bondholders agreeing to a 15% write-off, known as a haircut, on the loan principal.
Nevertheless, significant differences remained around the so-called Value Recovery Instrument (VRI) and Downside Adjustment provisions. The discussions and outlined proposals linked the VRI to the performance of Ethiopia’s exports, yet differed on operational details and expected export earnings. Leading to the collapse of negotiations.
The bondholders committee expressed “disappointment” in the failed negotiations, stating: “While it remains open to considering revised proposals from Ethiopia, the Committee has determined that, at this stage, negotiations have reached an impasse,” adding it would now consider all options, including legal action.
Ethiopian Policy Institute 