Ethiopia June 29, 2026 - Ethiopia has reached a preliminary agreement with a key group of international bondholders to restructure its defaulted $1 billion Eurobond, marking a major breakthrough in the country's long-running debt restructuring process and bringing Africa's second-most populous economy a step closer to restoring investor confidence and regaining access to international capital markets.
The agreement, announced by Ethiopia's Ministry of Finance on Monday, covers the country's sole international bond, which matured in December 2024 after Ethiopia defaulted on its external debt obligations in late 2023 amid mounting fiscal pressures and a severe foreign exchange shortage.
Under the proposed terms, bondholders will exchange the existing $1 billion Eurobond for a new $880 million bond carrying a 6.15% annual coupon and maturing in 2029. The agreement also provides for the payment of $99.375 million in previously missed coupon payments, together with a consent fee for participating investors.
In addition, the restructuring package includes a New Money Warrant, which will give bondholders the option to invest in a future Ethiopian sovereign bond worth up to $1 billion at market-based rates or receive up to $90 million in cash under specified conditions.
The innovative instrument is intended to provide Ethiopia with future financing flexibility while offering investors an opportunity to participate in the country's economic recovery.
The Ministry of Finance said the restructuring framework has received support from the International Monetary Fund (IMF), which determined that the proposed terms are consistent with Ethiopia's debt sustainability objectives under its ongoing economic reform programme. Ethiopia's Official Creditor Committee, co-chaired by China and France, also raised no objection to the preliminary agreement.
The latest breakthrough follows months of difficult negotiations that had previously stalled after disagreements emerged between private bondholders and Ethiopia's official bilateral creditors over the principle of "comparability of treatment," which requires commercial creditors to provide debt relief broadly comparable to that offered by official lenders.
Earlier this year, Ethiopia was forced to reopen negotiations after its first restructuring proposal was rejected by official creditors, while a revised offer was subsequently turned down by bondholders, prolonging uncertainty over the country's debt resolution process.
The latest agreement was reached with an Ad Hoc Committee representing approximately 45% of holders of Ethiopia's international bond. Authorities said the transaction will now move toward a formal exchange offer expected to be launched in the coming months, subject to final documentation and regulatory approvals.