Ethiopia is nearing the end of a years-long, billion-dollar debt crisis.

Written by Ziad Abdel Fattah:

Ethiopia has reached an agreement to restructure non-performing bonds Worth $1 billion, in a move that represents a breakthrough in a crisis that has lasted for years.

Ethiopia’s finance ministry announced on Monday that it had reached a preliminary agreement with major international bondholders to restructure $1 billion in troubled bonds, a move that represents a major breakthrough in a multi-year debt crisis and brings the country closer to restoring its financial stability.

The agreement is seen as an important test of the effectiveness of the “common framework” launched by the G20 during the coronavirus pandemic to coordinate debt restructuring operations for low-income countries, amid challenges to its implementation due to differing positions of official creditors and private sector investors.

New bonds worth $880 million

Under the agreement, Ethiopia will issue new bonds worth $880 million, payable in installments until 2029, at an interest rate of 6.15%. The government will also pay approximately $99.4 million in outstanding interest and fees related to approving the agreement.

The agreement also includes a new financing mechanism that gives bondholders the right to purchase up to $1 billion in future Ethiopian issuances, at market-linked interest rates, with the government retaining the right to settle this obligation in cash up to a maximum of $90 million.

Samir Gadio, head of Africa strategy at Standard Chartered Bank, said the new guarantee structure was the decisive factor in bringing the views of the government and creditors closer, stressing that the deal achieves a balance that satisfies all parties, and also gives investors a better financial position compared to the previous terms.

The IMF approves the safeguards structure.

The Ethiopian Ministry of Finance confirmed that the International Monetary Fund approved the safeguards structure as being consistent with debt sustainability goals, and that China and France, which co-chair the Committee of Official Creditors, did not raise any objections to the agreement, although it still needs the full approval of the committee.

Following the announcement, Ethiopian international bonds rose by about 2.9 cents to 108.42 cents to the dollar, their highest level since January, indicating improved investor confidence in the path to resolving the crisis.

The agreement is the end of negotiations that began in 2021. 

The agreement brings to a close a long negotiating process that began in January 2021 when Ethiopia requested to take advantage of the G20's common framework for debt relief, before officially defaulting on its international bonds in December 2023.

Although the government reached an agreement with official creditors in March 2025, negotiations with commercial bondholders have repeatedly stalled. A previous agreement collapsed in January 2026 following objections from official creditors, and investors rejected a revised offer last May, with some threatening legal action.

The new agreement did not address any possible settlement regarding these measures.

The Ethiopian crisis has revealed significant challenges within the G20's common framework, particularly with regard to the principle of "equal treatment," which stipulates that all categories of creditors should bear similar losses.

Bondholders felt that the improvement in Ethiopia’s economic indicators did not justify the extent of the concessions required of them, while the Ethiopian government criticized the negotiation mechanism, arguing that involving commercial investors at an early stage would have contributed to accelerating the achievement of an agreement.

The Ethiopian government plans to finalize the deal in the coming months by implementing a bond swap offer, after agreeing on the non-financial terms and obtaining final approval from the official creditors' committee.