Ethiopia seeks to restructure debt for over USD 1 billion

Ethiopia plans to restructure an additional USD 1 billion of its debt as the government seeks to free up funds to support its economic recovery.

The Ministry of Finance affirms that restructuring of the country’s debt will provide a grace period of as long as six years and extend the maturity by 10 years. USD 2.5 billion in principal and interest payment has already been postponed for five years by commercial creditors under the first external debt restructuring scheme offered to developing country’s by the G20 Summits Debt Service Suspension Initiative (DSSI).

The announcement to restructure an additional USD 1 billion in debt comes after Ethiopia adopted the DSSI framework in January, a move that caused uncertainty among creditors and even led to several financial consulting firms like Fitch Ratings Inc., and S&P Global Ratings lowering Ethiopia’s ranking as a borrower.

Separately, the International Monetary Fund last week urged Ethiopia to quickly create a creditor committee to support the nation’s debt plans.

The IMF confirmed back in February that it backed Ethiopia’s move to rework its debt under the G20 program as it would strengthen debt sustainability, and boost the nation’s efforts of recovering from the coronavirus pandemic. With sovereign debt, Chinese loans and other official credit, Ethiopia is considered a key test for the G20 push aimed at averting an onslaught of defaults in the developing world.

Lastly, according to Eyob Tekalign, State Minister of Finance, the plan to restructure USD 1 billion in debts does not include Eurobonds.

Bloomberg

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