Ethiopia’s coupon miss sees it become Africa's latest defaulter
On Tuesday, Ethiopia marked Africa's third default in as many years by failing to fulfill a $33 million coupon payment on its sole $1 billion international government bond.
The country, ranked as Africa's second most populous, had declared its intention to formally enter default earlier in the month, citing severe financial challenges resulting from the aftermath of the COVID-19 pandemic and a concluded two-year civil war in November 2022.
Although the payment was initially due on December 11, Ethiopia technically had until Tuesday to submit the funds, thanks to a 14-day 'grace period'. According to Reuters, as of the close of business on Friday, December 22, the final international banking working day before the grace period lapsed, bondholders had not received the coupon payment.
Points clés à retenir
The World Bank's 2023 International Debt Report issued a cautionary warning, highlighting that the world's poorest nations face a debt crisis exacerbated by escalating borrowing costs stemming from interest rate hikes in the United States and Europe. According to the report, around 60% of low-income countries are either currently facing the risk of debt distress or are already amid such distress. Ethiopia, in line with expectations, has now become the third African nation, alongside Zambia and Ghana, to undergo a comprehensive restructuring within the "Common Framework." Ethiopia initially sought debt relief under the G20-led initiative in early 2021. Although progress was initially impeded by the civil war, the country, facing depleted foreign exchange reserves and surging inflation, reached a debt service suspension deal with its official sector government creditors, including China, in November. This anticipated default underscores the financial challenges confronting nations in the current global economic landscape.
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