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Ethiopia, second largest nation in Africa, falls into default trap

Ethiopia Defaults
From SM

By Staff Reporter

ADDIS ABABA – December 27, 2023 (BORKENA) – Ethiopia, the second largest nation in Africa with 115 million people, has become the third default African country next to Ghana and Zambia as it failed to settle a 33 million USD coupon payment (annual interest rate) on its bond by the December 11, 2023 deadline.

The East African nation, which has been wallowing in civil war, mal administration, ethnic ailments, has made official a few weeks back that “it intended to formally go into default” as it has been under severe financial strain.

Ethiopia was actually expected to finalize settling the coupon payment (annual interest rate) of the 1 billion USD bond on December 11, 2023 but later allowed a 14-day grace period that expired yesterday, 26 December 2023.

Sources indicated that bondholders had not received the coupon, interest, until the due date, December 22, 2023, the last international banking working day before the grace period expires.

Earlier in 2021, Ethiopia, with its foreign exchange reserves depleted and inflation soaring, requested the G20 led initiative debt relief, but it was not fruitful.

The country also reached an agreement recently with bilateral creditors to suspend loan payments, with a request for the extension of maturity to January 2032 and a reduced yield of 5.5%.

The conflict the federal government has been engaged in with combatants in Amhara, one of the two largest regions in the country, has been draining the economy of the country. If the conflict in that part of the country keeps going, the economy will worsen following devastating progress of trade, investment and agriculture.

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