Ethiopia has missed a $33 million coupon payment on its $1 billion Eurobond as of the 22nd of December as the country joins two African countries Ghana and Zambia who have also defaulted on Eurobond within the last three years.
Why is this important: This is Ethiopia's only international government
bond with payments due on the 11th of December but with a 14-day grace.
According to S&P Global Ratings Ethiopia has entered a selective default,
which means the debtor selectively defaults on a particular issue while
continuing to make timely payments on other issues. The rating agency lowered
Ethiopia's long- and short-term foreign currency sovereign ratings to 'SD/SD'
(selective default) from 'CCC/C'. It also lowered its rating on the Eurobond
issue maturing 2024 to 'D' (default).
The bottom line: Ethiopia recently reached an agreement with
bilateral creditors to suspend debt payments until 2025 as it faces economic
challenges such as 29.29 per cent inflation and growing debt repayments. The
government is trying to address these issues and has requested a debt rework
under the G20's Common Framework restructuring process as it aims to secure an
International Monetary Fund (IMF) loan by March 31, 2024.