Exclusive: Ethiopia to seek debt relief under G20
NAIROBI (Reuters) – Ethiopia plans to seek restructuring of its sovereign debt under a new common G20 framework and is examining all available options, the country’s finance ministry told Reuters on Friday.
Ethiopian government bonds saw their biggest daily drop in news and analysts said restructuring concerns could spill over to other borrowers.
G20 countries agreed in November for the first time on a common approach to restructuring public debt to help ease pressure on some developing countries pushed to default risk by the costs of the coronavirus pandemic .
Chad on Wednesday became the first country to formally request debt restructuring under the new framework, and a French finance ministry told Reuters on Thursday that Zambia and Ethiopia were most likely to follow suit.
Asked whether Ethiopia is seeking to seek debt restructuring under the G20, Finance Ministry spokeswoman Semereta Sewasew said: “Yes, Ethiopia will look at all options for debt relief. debt treatment available in the G20 press release published in November. ”
Ethiopia’s public debt to be repaid in 2024, which it issued at the end of 2014, plunged 8.4 cents on the dollar, from around the pair to just under 92 cents.
Ethiopia is already benefiting from a suspension of interest payments to its official sector creditors until the end of June as part of an initiative between the G20 and the Paris Club of creditor countries.
In the new framework of the G20, debtor countries should seek an IMF program to put their economies back on a more solid footing and negotiate a reduction in the debt of public and private creditors.
Ethiopia has a $ 1 billion bond outstanding, although only $ 66 million in interest on the issue matures this year.
The announcement that Ethiopia would seek debt relief has made investors question whether they would be left behind in the event of a restructuring.
“Since the G20 common framework has yet to be tested, we hope the G20 will come up with some kind of explanation, as this uncertainty can hit countries’ ratings and spill over into other credits. from sub-Saharan Africa, ”said Simon Quijano-Evans, chief economist at Gemcorp Capital LLP.
ING’s emerging market sovereign debt strategist Trieu Pham said Ethiopia’s having Eurobonds in circulation was cause for concern as it could have broader implications.
“If Ethiopia were to go down this path, it could weigh on the general feeling, as people will wonder if there could be more (following),” he said.
Reporting by Omar Mohammed in Nairobi and Leigh Thomas in Paris; Additional reporting by Marc Jones, Karin Strohecker and Tom Arnold in London, editing by Louise Heavens, Philippa Fletcher and Gareth Jones