Ethiopia failed to make an interest payment on Bond making it the latest defaulter in Africa.
11th of December was the deadline for the Horn of Africa country to pay a $33 million coupon with a grace period ending on Monday.
Ethiopia now joins a growing list of countries including Zambia, Ghana and Sri Lanka that have fallen behind on their eurobound payments in recent years.
Ethiopia’s Minister of Finance said that the government wants to treat all creditors similarly and so did not want to make the payment.
A senior reform adviser at the Ministry of Finance revealed on Monday that the payment has not been made and will not be made.
Last month Ethiopia and its bilateral creditors arranged to stop making loan payments.
The government requested bond holders prolong the maturity from July 2028 to January 2032. Ethiopia also requested creditors to lower the yield from the existing 6.625% to 5.5% in its counter-proposal for a restructuring.
Ethiopia is attempting to restructure its debt using the common framework of the Group of 20. The G20’s plan is gaining traction following Zambia and Ghana’s restructuring successes.
Ethiopia has been attempting to restructure its debt since 2021. The Civil War in the Northern area soured investor confidence and stunted economic growth.
The country finally secured an in-principle deal with bilateral creditors to halt debt payments.
Ethiopia boasts a rich and complex economic history, marked by periods of prosperity, struggle, and resilience.
Ancient Origins (Pre-Colonial Era):
- Aksumite Empire (1st-8th centuries AD): Flourished through trade, minting its own currency, and controlling key Red Sea routes.
- Feudal System: Land ownership concentrated among the nobility, with peasants paying tribute in the form of agricultural produce.
Colonial Period (19th-20th centuries): - Italian Invasion (1935-1941): Disruption and exploitation under Italian rule hampered economic growth.
Post-Colonial Era: Land reforms under Emperor Haile Selassie aimed to improve equity, but challenges like dependence on agriculture and limited industrialization persisted.
Socialist Experiment (1974-1991):
- Derg Regime: Nationalization of industries and land collectivization under a Marxist-Leninist ideology.
- Economic Stagnation: Centralized planning, coupled with civil war and political instability, led to food shortages and economic decline.
Transition to Market Economy (1991-Present):
- EPRG Rule: Gradual shift towards a market-oriented system, privatization of state-owned enterprises, and foreign investment promotion.
- Mixed Results: Periods of high economic growth, particularly in the early 2000s, driven by agriculture, infrastructure development, and service sectors. However, challenges like income inequality, dependence on foreign aid, and ethnic tensions remained.
Recent Developments (2010s-2023):
- Mega-Projects: The Grand Ethiopian Renaissance Dam (GERD) aimed to boost energy production but triggered regional tensions over Nile River water rights.
- Conflict and Debt: The Tigray War since 2020 and rising public debt, exacerbated by the COVID-19 pandemic, contributed to economic difficulties.
December 2023 Default: Ethiopia defaulted on a $1 billion Eurobond payment, highlighting the culmination of various economic pressures.
Looking Ahead:
Ethiopia’s economic future hinges on addressing issues like conflict resolution, debt restructuring, diversifying the economy beyond agriculture, and promoting inclusive growth. Its rich history and resilient spirit offer a foundation for navigating these challenges and building a more stable and prosperous future.
