Ethiopia reaches debt overhaul deal with bondholders
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Ethiopia has reached a preliminary deal with key bondholders to restructure its defaulted $1 billion international bond, the finance ministry said on Monday. The agreement brings the country closer to resolving a long-running debt crisis that has tested the G20’s Common Framework.
Under the proposal, Ethiopia will issue an $880 million bond to be repaid in instalments through 2029 at an interest rate of 6.15%. The deal also includes payment of $99.4 million in missed coupons and a consent fee.
A central feature of the agreement is a “New Money Warrant” that gives bondholders the option to buy into a future Ethiopian bond of up to $1 billion at a market-linked interest rate. Ethiopia can choose to settle the warrant in cash instead, up to a cap of $90 million.
Standard Chartered’s Samir Gadio said the warrant bridged the gap between the two sides. He said the structure should leave all parties satisfied and could make bondholders marginally better off if Ethiopia exercises its buyback option.
The International Monetary Fund said it welcomed the agreement and said the structure was consistent with Ethiopia’s macroeconomic and debt sustainability objectives. Ethiopia also said the co-chairs of its Official Creditor Committee, China and France, had raised no objections, although wider approval is still needed.
The deal caps a difficult restructuring process that began when Ethiopia signalled in 2021 that it would seek debt relief under the Common Framework and later defaulted in 2023. Talks with commercial creditors proved more difficult than negotiations with official lenders, and a January 2026 agreement later collapsed.
The case has highlighted tensions inside the G20 framework, especially over the principle of comparable treatment. Bondholders argued that Ethiopia’s improving outlook did not justify the losses demanded, while the finance ministry said creditors and the IMF should have engaged bondholders earlier.
Ethiopia now plans to implement the deal through an exchange offer in the coming months, once the remaining non-financial terms are settled and the wider Official Creditor Committee gives approval. The bond rose more than 3 cents after the draft agreement was announced.
