Ethiopia Seeks Market-Friendly Solution to Debt Restructuring

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Ethiopia’s government wants to find a “market friendly” solution for a planned debt restructuring to ensure it has access to the markets for more capital in coming years, State Minister for Finance Eyob Tekalign Tolina said.

Eyob set out the state’s intentions on a call with investors on Thursday to discuss the proposed reorganization of Ethiopia’s loans under a Group-of-20 initiative.

“We want this liability exercise to not affect our ability to raise more capital,” Eyob said by text message Friday. “It’s the government’s intention to “find a market friendly solution given Ethiopia’s interest to raise significant capital from the market in the next couple of years,” he said.

Yields on Ethiopia’s $1 billion of 2024 Eurobonds soared to nine-month highs after the government’s said on Jan. 29 it intends to restructure its external debt. The announcement led Fitch Ratings to downgrade the nation’s credit and warn of an increased risk of default.

Pandemic Fallout

Ethiopia, like other African nations, is looking to offset the fallout from the coronavirus pandemic on its economy. Its position has been exacerbated by fighting in the northern Tigray region and a border dispute with Sudan that’s disrupting trade flows.

Eyob said the state will pay a coupon on the debt that falls due in June.

Two investors who attended Thursday’s call said the government indicated it will include include Eurobonds in an overhaul of its external debt. That would mark a shift in the government’s position after the state earlier this year said it would only as a last resort include private creditors in the planned restructuring.

Eyob denied the government has made any decision on how Eurobond holders will be treated.

“There is no indication whatsoever from us one way or the other,” he said. “We did indicate that given the phrase ‘comparable treatment’ in the common framework, the issue may come up at the creditors committee,” Eyob said, adding that the government is awaiting advice from the Paris Club of creditors on the matter.

Yields on the 2024 dollar bonds dropped one basis point on Friday to 8.98%.

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