Ethiopia has defaulted on a $1 billion bond, failing to make a $33 million interest payment after the expiry of a grace period on Monday.
Situated in the Horn of Africa, the country was due to pay this interest amount on December 11.
However, as Finance Minister Ahmed Shide explained on state TV on Thursday, the government chose not to proceed with the payment, intending to treat all creditors equally.
Senior reform advisor at the Ministry of Finance, Hinjat Shamil, confirmed on Monday that the payment was not made and there are no plans to fulfil it.
Last month, Ethiopia had agreed with bilateral creditors to suspend debt payments. In a proposed restructuring plan, the government has asked bondholders to extend the maturity period for amortization from July 2028 to January 2032 and to reduce the coupon rate from the current 6.625% to 5.5%.
In early 2021, Ethiopia initially sought debt relief under a G20-led initiative. Progress was stalled by the civil war, but in November, the country’s official sector government creditors, including China, consented to a debt service suspension agreement. This decision came as Ethiopia faced dwindling foreign exchange reserves and rising inflation.
With this development, Ethiopia joins Ghana and Zambia as the latest African nations to default on their loan agreements.
