Ethiopia reached a preliminary agreement on Tuesday with an ad hoc committee representing about 45% of holders of its defaulted $1 billion Eurobond due 2024, the Ministry of Finance said. The deal includes exchanging the existing bond for a new $880 million bond maturing in 2029 with a 12% principal haircut and a 6.15% interest rate, along with payments for missed coupons and a consent fee.
This exchange implies a 12% principal haircut for bondholders participating in the deal. The new bond will carry an annual interest rate of 6.15% and will be repaid in four installments between July 2026 and July 2029, with the first principal repayment of $180 million scheduled for July 2026. The government will also pay $99.4 million in missed coupon payments and a consent fee to bondholders as part of the package, officials said.
Under the terms of the preliminary agreement, Ethiopia will exchange the existing $1 billion Eurobond due in 2024 for a new $880 million bond maturing in July 2029, according to the Ministry of Finance.
The deal includes a “New Money Warrant” that offers existing bondholders the option to participate in a future Ethiopian international bond issuance of up to $1 billion at a market-linked interest rate, the Finance Ministry confirmed. Ethiopia retains the option to settle the warrant in cash, with a cash settlement capped at $90 million. The warrant is intended to attract new capital and align creditor returns with Ethiopia’s gradual return to international bond markets. The Ministry of Finance has shared the warrant’s terms with the International Monetary Fund, which confirmed that the instrument is consistent with Ethiopia’s debt sustainability targets under its IMF program.
Ethiopia defaulted on the Eurobond in December 2023 after missing a coupon payment on the 6.625% note due in 2024, records show. Initial restricted discussions with bondholders took place between Dec. 23, 2023, and Jan. 1, 2024, followed by renewed negotiations with an ad hoc committee representing about 45% of bondholders from June 5 to June 28, 2026. A prior preliminary restructuring deal announced on Jan. 3, 2026, collapsed after objections from official creditors and rejection by bondholders of a revised offer in late May, sources confirmed. The Ministry of Finance announced on June 29, 2026, that a new agreement in principle had been reached with the ad hoc committee, marking a breakthrough after more than two years of intermittent negotiations.
The Ministry of Finance stated that the terms of the agreement have been conveyed to the Official Creditor Committee for their non-objection and to the International Monetary Fund to confirm alignment with Ethiopia’s medium-term debt sustainability framework. An IMF spokesperson said the Fund “welcomed” the agreement and confirmed that the warrant is consistent with IMF debt parameters for Ethiopia. According to Reuters, bondholder representatives criticized the G20 Common Framework process during earlier phases of talks, highlighting frustrations with coordination between official and private creditors.
Ethiopia’s debt restructuring is being conducted under the G20 Common Framework for Debt Treatments, which coordinates sovereign debt workouts involving both official and private creditors. The government reached a restructuring agreement with bilateral creditors in July 2024, which the Finance Ministry said would provide over $3.5 billion in cash-flow relief and create room for negotiations with bondholders. The Eurobond agreement in principle has been sent to the Official Creditor Committee for a “non-objection” to ensure consistency with the Common Framework process. Tensions between official creditors and private bondholders have been cited as key reasons for delays in Ethiopia’s wider economic recovery, with analysts and bondholder representatives pointing to “deep flaws” in the Common Framework given the time taken to align treatments on the same debt stock.
Market reaction to the preliminary agreement was positive, with Ethiopia’s Eurobond price rising more than three cents on the dollar, reflecting improved investor sentiment and expectations of a final deal. The restructuring package, which includes the 12% principal haircut, extended maturity to 2029, and 6.15% coupon, is expected to ease near-term debt-service pressures and improve Ethiopia’s cash-flow profile. By reducing principal from $1 billion to $880 million and spreading repayments over four installments, the deal aims to reduce Ethiopia’s annual external debt-service burden while maintaining market-based terms acceptable to investors, domestic business sources said.
Ethiopia’s Eurobond is the country’s only international bond, making its restructuring central to the broader sovereign debt strategy and external financing outlook. The default and subsequent restructuring efforts have unfolded amid chronic foreign-exchange shortages, regional security challenges, and macroeconomic volatility affecting investor perceptions. Prime Minister Abiy Ahmed’s economic liberalization agenda, which includes opening key sectors to private and foreign investment, has been linked to the need to restore investor confidence through credible debt restructuring, analysts noted. Successful completion of the Eurobond deal is viewed as a key step in supporting Ethiopia’s IMF-backed economic reform program by aligning debt service with sustainability targets and stabilizing public finances. The Finance Ministry has indicated it aims to implement the restructuring in 2026 through an exchange offer once remaining non-financial terms are agreed upon and required sign-offs from official creditors are obtained.
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