Three years after defaulting on a $1 billion international bond, Ethiopia secured approval from its official creditors on August 21, 2026 to finalise the restructuring of this landmark eurobond. The deal paves the way for a market return, but remains subject to final approval from private bondholders.
A deal three years in the making
The road has been long. Since the 2023 default, Ethiopia has gone through multiple rounds of negotiations with an ad hoc committee of private creditors and the Official Creditor Committee (OCC), co-chaired by France and China. A first agreement, reached in January 2026, was rejected by the OCC on the grounds that it did not ensure the "comparability of treatment" between public and private creditors — a cardinal principle of the G20 Common Framework for sovereign debt restructuring.
After further negotiations, a new agreement in principle was reached in June 2026. The OCC formally validated this framework on August 21, 2026. The sign-off from private bondholders now constitutes the final step before definitive closure.
Terms of the restructuring
The new bond will be issued at $880 million — a 12% haircut on the original principal — carrying a coupon of 6.15% and a repayment schedule running from July 2026 to July 2029. Unpaid coupons accumulated since the default, estimated at approximately $99.4 million, will be settled in full. Bondholders accepting the restructuring will also receive a consent fee of 0.5% of the nominal amount.
A novel instrument: a new money warrant will allow Ethiopia to raise up to $1 billion in additional financing from July 2028, subject to macroeconomic conditions being met. This mechanism is designed to reward creditors who take the risk of reinvesting in a recovering economy.
The IMF as cautious arbiter
The main sticking point remains the projection of Ethiopian exports. The IMF projects $6.37 billion in medium-term exports, against the $7.21 billion in the government's scenario — a gap of nearly $900 million that weighs on debt sustainability under multilateral institutions' models. The IMF support programme, ongoing since 2023, ties final approval to the trajectory holding.
Why it matters
Ethiopia is sub-Saharan Africa's second-largest economy by population. Its default had triggered contagion effects on international investors' perception of African risk. The resolution of this eurobond — if confirmed — would send a positive signal to the entire continent: G20-framework restructurings can succeed, even when initial disagreements between creditor blocs (Paris Club, Beijing) seem intractable. For markets in the Indian Ocean region, where several emerging states are eyeing access to international bond markets, this precedent is one to watch closely.
Sources: French Treasury (August 28, 2026), Agence Ecofin, Zonebourse.