Ethiopia became Africa’s third defaulting country on Tuesday after it failed to make a $33 million “coupon” payment on its only international government bond, Reuters reported.
Africa’s second most populous nation announced earlier this month its intention to formally default amid financial difficulties due to the COVID-19 pandemic and a two-year civil war ending in November 2022.
The payment was supposed to be made on December 11, but technically had until Tuesday to provide the money because of a 14-day “grace period” spelled out in the $1 billion bond. According to two sources familiar with the situation, bondholders had not been paid the coupon as of late Friday December 22, the last international banking business day before the grace period expired.
As a result of the widely expected default, Ethiopia will join two other African countries, Zambia and Ghana, in a full-scale Common Framework restructuring. Ethiopia first requested debt relief under the G20 initiative in early 2021.
Since the end of the civil war, the country’s foreign exchange reserves have been depleted, with inflation soaring. Official creditors of the Ethiopian government, including China, agreed on a deal to suspend debt service in November.
On December 8, the government announced the failure of parallel negotiations it had been holding with pension funds and other private sector creditors holding its bonds.
Credit rating agency S&P Global downgraded the bonds to Default status on December 15 on the assumption that coupon payments would not be issued.
