Impact of Ethiopia’s debt plan on private creditors not yet clear, adviser says

NAIROBI (Reuters) – Ethiopia cannot yet say whether private creditors will be affected by the country’s “cautious” plan to review its debt, a finance ministry adviser said on Tuesday, after the week’s announcement The latter resulted in a sharp drop in the Ethiopian dollar bond.

Addis Ababa announced on Friday that it plans to restructure its sovereign debt under a new common framework of the G20 group of major economies designed to help cope with financial pressures from COVID-19. He said he was looking at all the options.

After the news, the price of Ethiopia’s dollar bond issue suffered its largest drop in one day, falling from around 8 cents on the dollar to less than 92 cents. Tradeweb data showed it recovered slightly on Tuesday to around 93 cents.

“This is a proactive government strategy to ensure that our finances are in order so that we are in a much better position to access international financial markets,” Brook Taye, senior advisor at the ministry, told Reuters. finances.

Calling the debt plan “prudent”, he said it was too early to say what it would mean for private creditors.

“Without any sort of exercise at this point, it’s very difficult for us to make any discussion, comment or suggestion on what’s going to happen,” the advisor said.

The G20 framework unveiled in November aims to streamline the process for poor countries to reduce their outstanding debt and provide relief for bilateral and private creditors.

Ethiopia started a new debt sustainability analysis with help from the International Monetary Fund before engaging with creditors, Brook said, adding that the country’s indebtedness stood at around 60% of the proceeds. gross interior.

Ethiopia has worked with creditors in the past to manage its debt burden. China, one of its main creditors, restructured its loans to Ethiopia in 2018, including a $ 4 billion loan used to build a new railway line from landlocked Ethiopia to the sea.

Brook said the restructuring was not made necessary by “a dire situation” and said Ethiopia was up to date with its $ 2,024 bond payments.

Editing by Karin Strohecker and Edmund Blair

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