Ethiopia’s State Finance Minister Eyob Tekalign announced that bondholders will incur losses as part of the country’s debt restructuring, emphasizing hopes for completion by year-end. Ethiopia, which defaulted in December 2023, is negotiating a $3.4 billion program with the International Monetary Fund (IMF), but progress has been slow. Recent proposals for an 18% writedown on a $1 billion bond maturing in 2024 have been rejected by investors.
Eyob indicated that the IMF’s debt sustainability analysis necessitates a haircut due to the country’s solvency issues. While formal discussions with bondholders are not currently scheduled, Ethiopia aims to engage them during the upcoming IMF World Bank meetings.
To mitigate the impact of currency depreciation on the poorest citizens, the government has allocated 30% of its 2024 budget to various subsidies and salary increases for low-income civil servants. Eyob downplayed inflation forecasts, expecting single-digit inflation by June 2025, while reforms have rekindled investor interest, particularly in mining, agriculture, and manufacturing. Additionally, he noted an impending swap line with China, expected to surpass the $800 million deal with the UAE, which would boost trade between the nations.