The Ministry of Finance claims its failure to service a USD 33 million Eurobond coupon this month is intentional, and not due to a shortage of foreign currency.
“Ethiopia’s decision to withhold the December coupon payment on its Eurobond… stems from the intention to treat all its external creditors equitably,” said State Minister for Finance Eyob Tekalign (PhD) during a one-hour meeting with more than 100 Eurobond investors on December 14.
The State Minister led the meeting in a bid to restructure Ethiopia’s one billion Eurobond maturing December 2024. The first coupon was due on December 11, though there is a two-week grace period.
A statement from the Finance Ministry says failure to treat all external creditors equitably would “jeopardize ongoing discussions with other external lenders.”
Last month, the Paris Club and other external creditors agreed to a two-year debt suspension agreement with Ethiopian officials. China, which co-chairs the Paris Club with France but is not a member, reached its own, separate debt standstill agreement with Ethiopia.
Efforts for a larger-scale external debt restructuring under the G-20 Common Framework have been faced with delays, and many of these debts are maturing.
Eyob and his colleagues want to see a Staff Level Agreement reached with the IMF in the coming months. The two-year debt suspension also hinges on a deal with the IMF.
While the State Minister was leading the meeting with lenders, credit-rating agency Fitch downgraded Ethiopia’s rating to ‘C’, citing an increased likelihood of default. It is an even lower standing than the downgrade to ‘CC’ from Fitch last month.
Fitch says it would downgrade Ethiopia to a ‘restricted default’ (RD) rating if it fails to pay the Eurobond coupon within the coming 10 days.