Ethiopia's Bondholders Dig in Heels Over Debt Proposal
Ethiopia's proposal for a 20% haircut on its $1 billion debt has been met with resistance from bondholders.
The proposal, which was announced in August 2024, would see Ethiopia pay bondholders 66.25 cents on the dollar in January and July. Bondholders have countered with their own proposal, which would see them paid 66.25 cents on the dollar in January and 33.75 cents on the dollar in July.
Ethiopia's debt-to-GDP ratio is currently at 60%, which is above the 55% threshold set by the International Monetary Fund (IMF). The country has secured debt suspension agreements with bilateral lenders and is in discussions to restructure a $1 billion loan with the World Bank.
The proposed haircut is part of Ethiopia's efforts to reduce its debt burden and improve its macroeconomic stability. The country has been facing economic challenges in recent years, including high inflation and a large current account deficit.
The bondholders, however, are concerned that the haircut would set a precedent for other countries to seek similar reductions in their debts. They are also concerned that the haircut would reduce the value of their investments and make it more difficult for Ethiopia to borrow money in the future.
The negotiations between Ethiopia and its bondholders are ongoing, and it is unclear when a resolution will be reached.
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