Ethiopia Reaches Preliminary Deal on $1 Billion Bond Restructuring

Ethiopia reached a preliminary agreement with international bondholders to restructure $1 billion in sovereign bonds, marking a significant breakthrough in the country’s long-running debt negotiations after a default in 2023.

According to a statement sent by Finance Minister Ahmed Shide to Bloomberg, Ethiopian officials held targeted discussions between December 23 and January 1 with institutional investors controlling more than 45% of the outstanding bonds. The talks focused on 6.625% notes due in 2024, which had previously been at the center of stalled negotiations.

The tentative deal represents renewed momentum after talks collapsed in September, when both sides agreed to end discussions without an agreement. Since then, Ethiopia has intensified efforts to align its debt strategy with the requirements of international lenders, particularly the International Monetary Fund (IMF).

At the core of the preliminary agreement is a proposal from a bondholder committee calling for a substantial initial haircut on the outstanding debt. In return, the structure includes a mechanism that would allow higher repayments if Ethiopia’s export revenues improve, effectively tying investor returns to the country’s economic recovery.

Coffee and gold remain Ethiopia’s key export earners. The surge of more than 60% in global gold prices over the past year has strengthened revenue prospects for African gold producers, offering Ethiopia potential upside under the proposed framework.

The Ministry of Finance said the agreement is consistent with IMF program requirements and adheres to the principle of comparability of treatment, a key condition set by official creditor committees. Both the IMF and Ethiopia’s official creditors have been formally informed of the preliminary terms.

Looking ahead, the government said it intends to accelerate the restructuring of the 2024 bonds through a debt exchange offer or consent solicitation, targeting completion as early as 2026.

If finalized, the deal would ease pressure on Ethiopia’s strained public finances and signal progress in restoring investor confidence after years of economic shocks, conflict, and foreign exchange shortages. For markets watching Africa’s sovereign debt closely, Ethiopia’s tentative breakthrough could serve as a test case for balancing creditor losses with long-term growth-linked recovery.