The Ministry of Finance of Ethiopia today held a Global Investor Call to update its bondholders on the latest macroeconomic developments in the country, the status of its engagement with development partners, and Ethiopia’s strategy towards external creditors on debt treatment, the Ministry of Finance disclosed.
State Minister Eyob Tekalign led a one-hour session with more than a hundred participants, to present Ethiopia’s strategy towards securing a Eurobond treatment related to its outstanding Eurobond ahead of the Common Framework.
With Ethiopia having recently agreed debt service suspension arrangements with its official creditors, the Ministry of Finance is now seeking to ensure consistency and fairness by requesting other external creditors, including bondholders, to participate in similar debt arrangements, the Ministry indicated.
In this context, State Minister Eyob clarified that Ethiopia’s decision to withhold the December coupon payment on its Eurobond, despite the affordable amount at stake, stemmed from the intention to treat all its external creditors equitably. A failure to do so could indeed jeopardize ongoing discussions with other external lenders on the same matter.
Ethiopia’s strategy, as presented during the call, is to invite bondholders to contribute early on – and likely once and for all – to the resolution of its debt issue. This would enable bondholders to hold a performing instrument and receive payments, while the Common Framework process unfolds.
The parameters of the proposed debt treatment, according to the Ministry, are designed to minimize the risk of the agreement being revisited in the context of the Common Framework due to concerns over comparability of treatment and non-compliance with the Debt Sustainability Analysis (once finalized), while ensuring as little concession from bondholders as reasonably possible in the circumstances.
The Ministry asserted that it recognizes the risks bondholders would take in subscribing to this approach, and conveyed its readiness to discuss possible mitigants, including a loss reinstatement provision that would essentially reinstate bondholders in their previous position should Ethiopia be required to renegotiate the terms of the agreement in the next two years to ensure comparability of treatment.
The Ministry of Finance reiterated its strong desire to reach an agreement quickly with Ethiopia’s bondholders, and its commitment to restore normal relations with all its creditors at the earliest opportunity. The Ministry further underscored its commitment to transparency, good faith, and equitable approach to all external creditors.