Ethiopia now joins an unflattering list of developing countries that includes Zambia, Ghana and Sri Lanka after failing to make a $33 million coupon payment that was due two weeks ago. A fourteen-day grace period ended without Addis Ababa using it to make the payments.
The government maintains that it is “withholding” the payment and not unable to make it. And the reason for that is that it wants to treat all its external creditors “equitably”. However, bondholders were reportedly surprised when they had been informed of Ethiopia’s impending failure to make the payments.
The news comes as the country continues to struggle with a chronic hard currency shortage. According to the renowned accounting firm EY, the amount of foreign direct investment (FDI) Ethiopia attracted last year didn’t even reach $1 billion when, in comparison, Uganda earned more than $10 billion during the same period. Only six foreign direct investment projects operated in Ethiopia in 2022 as opposed to 34 three years prior.
Global geopolitical events like the Ukraine-Russia war have impacts on the amount of money investors want to spend in Ethiopia. But domestic instability has also decreased the country’s attractiveness significantly.
Ethiopia is in discussion to restructure its debt and has recently found a much-needed payment relief which is predicated on reaching an agreement with the International Monetary Fund (IMF) in early 2024.
Addis Ababa has also presented counterproposals for bondholders to extend the maturity dates and reduce interest rates from 6.625% to 5.5%.
