By Enyichukwu Enemanna
Ethiopia on Tuesday failed to make a $33 million “coupon” payment to its only international bondholders, becoming the third African country to default.
The African second most populous country had earlier this month announced that it may fail in making payment, having been under severe financial strain in the wake of the COVID-19 pandemic.
Additionally, the Tigray two-year civil war that ended in November 2022 has also been attributed to the default.
It was due to make the payment on Dec. 11, but technically had up until Tuesday to provide the money as a result of a 14-day ‘grace period’ clause written into the bond totalling $1 billion, a Reuters report says.
Bondholders had not received coupon payment as at the end of Friday Dec. 22, the last international banking working day before the expiration of the grace period.
The east African country joins two other African nations, Zambia and Ghana, in a full-scale “Common Framework” restructuring.
It first requested debt relief under the G20-led initiative in early 2021.
Progress was initially delayed by the civil war but, with its foreign exchange reserves depleting and inflation soaring, Ethiopia’s official sector government creditors, including China agreed to a debt service suspension deal in November.
On Dec. 8, the government said parallel negotiations it had been having with pension funds and other private sector creditors that hold its bond had broken down.
Credit ratings agency S&P Global then downgraded the bond, to “Default” on Dec. 15 on the assumption that the coupon payment would not be made.
