Ethiopia Becomes Africa’s Third Defaulter After Missing Payment Of $33 Million

On Tuesday, Ethiopia became the continent’s third default in as many years when it was unable to pay the $33 million “coupon” payment on its sole foreign government bond.

The second-most populous nation in Africa declared earlier this month that it planned to formally enter default. Following the COVID-19 pandemic and a two-year civil war that came to an end in November 2022, the country was severely financially strained.

Although it was originally scheduled to make the payment on December 11, a 14-day “grace period” provision in the $1 billion bond gave it until Tuesday to deliver the funds. At the end of Friday, December 22, the final working day for international banking before the grace period ends, bondholders had still not received their coupon payment, according to two people with knowledge of the matter.

As a result of the widely anticipated default, Ethiopia will be included in a comprehensive “Common Framework” restructuring along with Zambia and Ghana, two other African countries. Early in 2021, the East African nation made its first request for debt relief under the G20-led programme.

The civil war initially slowed down progress, but in November, Ethiopia’s official sector government creditors, including China, agreed to a debt service suspension deal as the country’s foreign exchange reserves ran out and inflation skyrocketed.

The government announced on December 8 that the parallel talks it was holding with pension funds and other creditors in the private sector that own its bond had broken down.

On December 15, S&P Global, a credit rating agency, downgraded the bond to “Default” based on the likelihood that the coupon payment would not be made.