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The agency also placed debt issued in Eurobonds, worth US$1 billion, in default for the same reason. However, there is no change in the rating of the debt issued in birr, the local currency, which is currently at CCC-, the last level before partial default
The Fitch rating agency downgraded the rating of Ethiopia’s international currency debt rating from the speculative category to partial default, following the non-payment on December 11 of a coupon of US$ 33 million. This payment was due to service the external debt of the country. To add to the woes, the agency also placed debt issued in Eurobonds, worth US$1 billion, in default for the same reason. However, there is no change in the rating of the debt issued in birr, the local currency, which is currently at CCC-, the last level before partial default.
Amidst these adverse developments, the Ethiopian government is currently negotiating with its creditors to achieve a restructuring of its debt issued in Eurobonds. Importantly, as reported by www.trendsnafrica.com from time to time, the Ethiopian government has already reached a debt suspension agreement with several of its creditors, including China, for USD 1.5 billion.
Explaining its rationale for defaulting coupon payment for the existing debt, the Ethiopian Ministry of Finance said its decision to “defer” was to maintain consistency and fairness. It has asked all external creditors, including bondholders, to participate in similar debt agreements, through a communication released by the Ministry of Finance. The fate of the current negotiation of Ethiopia with the IMF for an aid package depends on the success of the negotiations with the existing debtors including China.
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According to analysts, the landlocked Horn of Africa country needs about USD 20 billion to rebuild the country’s north after the conflict that has cost at least 500,000 lives. It has an external debt of around USD 28 billion. Inflation and foreign exchange shortages are the major pain points of the economy, which of late has shown considerable importance to reforms and privatization. But the nagging fights in the Northern region coupled with the Covid-19 impact and Russian -Ukraine war had a toll on the fledgling economy.
