Ethiopia has taken a key step on the path to restructuring of its sovereign debt. The Ministry of Finance announced Friday the conclusion of a preliminary agreement with a group of investors holding a portion of its $1 billion international obligation, which expires in 2024. This progress is considered crucial for this country. from East Africa, which has been involved for several months in a complex process of reorganization of its debt.

In a statement published on the official Facebook page of the ministry, the authorities indicate that the provisional agreement covers main financial terms of the restructuring. However, there are still issues to be resolved, in particular the non-financial aspects of the new instrument which will have to replace bonds that are currently in default. These discussions should continue in consultation with the Ad Hoc Committee representing the holders of obligations.

The Ministry of Finance also states that it has transmitted the terms of the agreement in principle at the International Monetary Fund (IMF) as well only to the Official Creditors Committee. The authorities are now waiting for the feedback from these two bodies. “The terms of the agreement in principle were referred to the Official Committee of Creditors for their non-objection, as well as to the IMF to ensure compliance with long-term debt sustainability from Ethiopia,” the statement said.

Ethiopia had defaulted on its only obligation international at the end of 2023, before opting for a restructuring of its debt within the framework of the G20 “Common Framework”. This mechanism imposes a comparable treatment of all debts owed to creditors bilateral, Eurobond holders and other commercial creditors.

For several months, the Ethiopian government has been committed in discussions with bondholders in order to explore different restructuring options, but negotiations take a long time progressed slowly. A turning point came last July, when the country has formalized an agreement with its bilateral creditors. According to the ministry des Finances, this agreement should generate greater cash relief to 3.5 billion dollars and paved the way for negotiations with bond investors.

According to the press release published on Friday, discussions formal meetings took place between December 23 and January 1 with the group of bondholders. The Ad Hoc Committee includes investors institutions collectively holding more than 45% of the bond received at Expiry in 2024. The Ethiopian authorities have indicated that they want to put in implement the restructuring as soon as possible in 2026.

Asked, the International Monetary Fund did not reacted immediately. This advance, although partial, reinforces the hope for a gradual outcome to the Ethiopian debt crisis, in a context where financial stability remains a major challenge for the economy of country.