Fitch downgraded on Wednesday Ethiopia's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'RD' (Restricted Default) from 'C'., due to its non-payment of "a bond worth $33 million" on December 11.
The agency also placed debts issued in Eurobonds worth $1 billion to 'D' from 'C for the same reason.
On the other hand, Fitch indicated in its statement that the rating of debt issued in birr, the local currency, set at “CCC-”, the last level before partial default, did not change.
The Ethiopian government is currently conducting negotiations with its creditors to restructure its debts issued with Eurobonds.
It has already reached an agreement with several of its creditors, including China, to suspend $1.5 billion in debt.
After the deadline expired on December 11, the Ethiopian Ministry of Finance attributed its decision to “postpone” this payment in order to achieve “consistency” among its creditors.
It explained in a statement that “Ethiopia’s decision to postpone the payment of the December euro-bonds, despite the reasonable amount, stems from the intention to treat all its external creditors fairly.”
The government is currently negotiating an assistance plan with the International Monetary Fund (IMF), but it must first reach an agreement on debt restructuring with the majority of its creditors.
The landlocked East African country, which has an external debt of about $28 billion, is facing high inflation and a shortage of foreign currency.
Upon assuming power in 2018, Prime Minister Abiy Ahmed announced an ambitious program aimed at reviving the economy but, the country's economy has since been hit by the war in Tigray, the Covid crisis and the Russian-Ukrainian war.
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