Ethiopia became Africa’s third default in as many years on Tuesday after it failed to make a 33-million-dollar “coupon” payment on its only international government bond.
Africa’s second-most populous country announced earlier this
month that it intended to formally go into default, having been under severe
financial strain in the wake of the coronavirus (COVID-19) pandemic and a
two-year civil war that ended in November 2022.
It had been supposed to make the payment on Dec. 11, but
technically had up until Tuesday to provide the money due to a 14-day ‘grace
period’ clause written into the 1 billion dollar bond.
According to two sources familiar with the situation,
bondholders had not been paid the coupon as of the end of Friday, Dec. 22, the
last international banking working day before the grace period expires.
Ethiopian government officials did not respond to requests
for comment on Friday or over the weekend, but the widely expected default will
see it join two other African nations—Zambia and Ghana—in a full-scale “Common
Framework” restructuring.
The East African country first requested debt relief under
the G20-led initiative in early 2021.
Progress was initially delayed by the civil war, but, with
its foreign exchange reserves depleted and inflation soaring, Ethiopia’s
official sector government creditors, including China, agreed to a debt service
suspension deal in November.
On Dec. 8, the government said parallel negotiations it had
been having with pension funds and other private sector creditors that hold its
bond had broken down.
Credit ratings agency S&P Global then downgraded the
bond to “default” on December 15 on the assumption that the coupon payment
would not be made.