Ethiopia officially defaulted on its only international government bond, missing a $33 million “coupon” payment. The East African nation, grappling with financial woes exacerbated by the COVID-19 pandemic and a recent civil war, had announced its intention to default earlier this month. Although the payment was originally due on Dec. 11, Ethiopia had until Tuesday to fulfill it due to a 14-day grace period embedded in the $1 billion bond.
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As of the end of Friday, Dec. 22, the last international banking working day before the grace period lapsed, sources revealed that bondholders had not received the coupon. Despite attempts to seek comments from Ethiopian government officials over the weekend, no response was provided. The anticipated default places Ethiopia alongside Zambia and Ghana in a comprehensive “Common Framework” restructuring.
Ethiopia had initially sought debt relief under the G20-led initiative in early 2021, and progress was hindered by the civil war. In November, facing depleted foreign exchange reserves and soaring inflation, Ethiopia’s official sector government creditors, including China, agreed to a debt service suspension deal. On Dec. 8, the government disclosed the breakdown of parallel negotiations with pension funds and other private sector creditors holding its bond.
Subsequently, on December 15, credit ratings agency S&P Global downgraded Ethiopia’s bond to “default,” anticipating the non-payment of the coupon.
