Ethiopia looks set to miss an interest payment due later on Monday on its December 2024 dollar bond, becoming the latest emerging-market sovereign to default on debt, Bloomberg News reported. The country’s finance ministry said on Friday, it was “not in a position to pay” the $33 million coupon because of the nation’s “fragile external position.” It added that “restricted discussions” it had held with a group of bondholders had thus far been unsuccessful.
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Ethiopia's agreement with its bilateral creditors, other than China, to suspend debt payments until 2025 could be voided if the country does not secure an International Monetary Fund (IMF) loan by March 31, 2024, the Paris Club of developed creditor nations said, Reuters reported. The debt service standstill for 2023 and 2024, which the central bank governor says will save the country $1.5 billion, applies to loans agreed before Nov. 10.
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The International Monetary Fund is in discussions with Ethiopian authorities, and any new program would require creditors' financial assurances, a spokeswoman said on Thursday, Reuters reported. The fund "welcomed" the progress toward restoring lasting peace in the East African country as well as the authorities' "homegrown economic reform agenda," said spokeswoman Julie Kozack in a scheduled press conference.
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The International Monetary Fund said on Thursday it was continuing to engage on a technical basis with Ethiopia despite a worsening conflict in the country, but given uncertainty, it has not begun discussions on a potential IMF financing program, Reuters reported. IMF spokesman Gerry Rice told a news briefing that the Fund is watching developments closely in Ethiopia, as well as in Sudan. It is too soon to tell how political developments related to a late October coup will affect Sudan’s request for debt relief and potential IMF disbursements in 2022, Rice said.
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Moody’s Investors Service cut Ethiopia’s sovereign credit rating for a second time since May, citing a delay in the nation’s planned debt restructuring and an escalating civil war, Bloomberg News reported. The company lowered the rating one level to Caa2, it said in a statement on Wednesday. Moody’s in March placed the country on review for downgrade, before cutting the rating two months later. The outlook is negative. The yield on Ethiopia $1 billion of Eurobonds climbed five basis points to a record 13.83%.
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Ethiopia doubled the statutory reserve requirement for commercial lenders and increased the amount of foreign currency they must remit to the central bank, in an effort to rein in inflation, Bloomberg News reported. From Sept. 1, the reserve requirement will increase to 10%, according to Fikadu Digafe, the National Bank of Ethiopia’s vice governor in charge of monetary policy and its chief economist. Banks will also be required to transfer 50% of their foreign-exchange holdings to the central bank, compared with 30% previously, he said.
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Ethiopia plans to restructure an additional $1 billion of debt as the government seeks to free up funds to support its economic recovery, Bloomberg News reported. Restructuring of the debt will provide a grace period of as long as six years and extend the maturity by 10 years, the Finance Ministry said in a report on its website. “$2.5 billion in principal and interest payment has been postponed for five years by commercial creditors under the first external debt restructuring scheme,” according to the report.
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A group of creditors that bought Etihad Airways PJSC-linked bonds are preparing to auction $463 million of claims against insolvent airlines Alitalia and Air Berlin to recover some of their investment, Bloomberg News reported. The trustee of bonds issued by EA Partners I and II -- two special purpose entities set up by the Abu Dhabi-based carrier -- hired Barclays Bank Plc to arrange the sale, according to a statement. Potential buyers will be able to access documentation on June 21 and the auction will take place within two weeks, it said.
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Investors in Ethiopia’s Eurobonds are losing out on the rally in emerging-market debt. The country’s 2024 dollar securities dropped for a fourth day on Monday as conflict in the northern Tigray region continued, Bloomberg News reported. Clashes between government soldiers and fighters loyal to the region’s ruling party stoked fears of a broader civil war at a time when the government is struggling to end ethnic violence shaking Africa’s second-most populous country.
South Africa should act to preserve its insolvent national airline and seek to partner the carrier with Ethiopian Airlines Group, according to a study commissioned for ruling-party lawmakers, Bloomberg News reported. The assessment, seen by Bloomberg, was prepared by African Aviation Services Ltd. and dated Oct. 4. It was presented to a group of African National Congress lawmakers on Monday, according to an ANC official who asked not to be identified because the information isn’t public.