Ethiopia defers Eurobond payment to next fiscal year

The Ethiopian government has officially announced the deferral of its Eurobond debt payment obligations to the next fiscal year. This decision is framed as a core component of a broad macroeconomic reform aimed at shifting the country’s debt distress rating from “High Risk” to “Moderate Risk.”

According to the Ministry of Finance (MoF) , although a partial payment for the $1 billion Eurobond was initially anticipated for the 2025/26 fiscal year, the payment has now been rescheduled. Finance Minister Ahmed Shide clarified that this rescheduling is not a sign of financial instability, but rather a mandatory requirement under the G20 Common Framework.

The Minister explained that the framework follows the principle of “Comparability of Treatment,” which ensures that private bondholders do not receive more favorable payment terms than official bilateral creditors. This alignment is necessary to maintain equity among all lending parties involved in the restructuring process.

The extension of the Eurobond payment is one of three pillars the government identifies as strategic victories for the country’s financial future. The first is support from multilateral institutions; Ethiopia has secured significant Balance of Payments and fiscal support from the International Monetary Fund (IMF).

Combined with budget support and project financing from the World Bank and other development partners, this creates substantial financial capacity.

The second pillar involves bilateral debt restructuring. The government successfully led complex negotiations with the Official Creditor Committee (OCC), resulting in a Memorandum of Understanding (MoU) for a general common framework with 15 creditor nations.

The third pillar is debt sustainability, with the ultimate goal of lowering Ethiopia’s Debt Sustainability Analysis (DSA) result to “Moderate Risk,” which will facilitate better access to international credit financing in the future.

While Eurobond negotiations continue through alternating points of agreement and divergence, the government reported success with bilateral partners.

Specifically, negotiations with China, Ethiopia’s largest bilateral creditor, have reached a critical stage. A “Minutes of Negotiation” was recently signed, and the final legal document is expected to be signed within the coming weeks.

During a recent nine-month report to Parliament, Ahmed Shide confirmed that Ethiopia will begin making certain payments to China within the remaining two months of the current fiscal year.

This indicates that the debt restructuring process is transitioning toward a regular payment schedule under a new agreement.

Negotiations with private Eurobond holders remain a highly sensitive issue. The Minister noted, “Sometimes we agree, and sometimes differences arise.” Any agreement made with private creditors must be approved by the OCC to ensure the terms are consistent with the concessions granted by other sovereign governments.

Despite the complexities of the negotiations, the government maintains a positive outlook. Efforts are underway to reach a comprehensive debt restructuring agreement by the end of the fiscal year to provide the economy with the necessary “breathing room.”Current data shows that the government allocated 463.4 billion Birr for domestic and foreign debt servicing this year. In the first nine months, 226.8 billion Birr was paid.

While this represents 81% of the nine-month plan, it accounts for only 48.9% of the total annual budget. This lower-than-planned performance is directly attributed to the ongoing debt restructuring negotiations, as several payments remain suspended until final agreements are signed.