IN SHORT: Ethiopia’s Ministry of Finance announced on May 28 that formal restructuring talks with the Ad Hoc Committee of private holders of its $1 billion Eurobond have collapsed after bondholders rejected a revised proposal offering a 12% principal haircut. The three-week restricted dialogue period from May 6 to May 27 ended without agreement. The ad hoc committee has warned it plans legal action. The bond continues to trade at approximately 104.75 cents on the dollar, reflecting the market’s expectation that Ethiopia will eventually pay in full.
Ethiopia is back in default limbo after the latest round of formal Eurobond restructuring talks ended without a deal, with the international bondholders’ committee rejecting a government proposal to write down 12% of the $1 billion outstanding principal, leaving Africa’s second-most-populous country without a resolution to a default that has persisted since December 2023. The Ministry of Finance confirmed the breakdown on May 28, saying the ad hoc committee rejected the revised terms during the designated negotiation period and that the restricted dialogue has been terminated.
- The revised proposal offered a 12% haircut on the $1 billion principal outstanding on Ethiopia’s 6.625% Notes due 2024. It included a repayment schedule of four installments: $180 million in July 2026, $180 million in July 2027, $260 million in July 2028, and $260 million in July 2029. The government also offered to clear $99.375 million in past-due interest accumulated from three missed coupon payments between December 2023 and December 2024, plus a 0.5% consent fee.
- The ad hoc committee, which collectively holds more than 40% of the 2024 notes and includes major institutions such as Morgan Stanley and Franklin Templeton, rejected the terms as inadequate. The committee has argued that the Comparability of Treatment principle requires private creditors to receive terms equivalent to those given to official bilateral creditors under the G20 Common Framework. The committee has separately warned it plans to pursue legal action to compel repayment.
- The breakdown follows a January 2026 preliminary agreement between Ethiopia and the bondholders that was subsequently rejected by the Official Creditor Committee, whose co-chairs said it did not meet the Comparability of Treatment standard. Ethiopia was then required to revise the proposal downward to satisfy its bilateral creditors, producing the 12% haircut offer that private bondholders then rejected in turn.
- Ethiopia’s government said it will assess all available options, including a potential exchange offer or other market transaction involving the 2024 Notes. An exchange offer would allow Ethiopia to bypass the ad hoc committee and approach all bondholders directly with new terms, potentially breaking the negotiating deadlock.
- Despite the default, Ethiopia’s economy is growing at more than 10% annually, the Grand Ethiopian Renaissance Dam is now generating more than 5,200MW, and the country successfully listed Ethio Telecom on the Ethiopian Securities Exchange on May 26. The IMF’s $3.4 billion programme remains active. The bond trades above par at 104.75 cents, suggesting the market is betting on repayment rather than sustained default.
The Eurobond collapse is a serious but not catastrophic development for Ethiopia’s economic trajectory. The country’s growth fundamentals are strong, the IMF programme is intact and the default is widely understood as a political-financial coordination problem under the G20 Common Framework rather than an inability to pay. The practical consequence is continued exclusion from international capital markets at a moment when Ethiopia needs foreign exchange to fund infrastructure, industrial expansion and the Dangote fertiliser joint venture at Gode. The IMF has made progress conditional on demonstrating sustainable debt, which requires a private creditor deal. That deal remains unresolved.
The Bigger Picture: Ethiopia’s Eurobond standoff is a microcosm of the G20 Common Framework’s structural failure to coordinate official and private creditor restructuring simultaneously. The Comparability of Treatment principle, designed to ensure fairness, has instead created a circular negotiating trap: official creditors set a floor that private creditors find inadequate, private creditors demand more, official creditors object. Ethiopia has now been in selective default for 18 months with no resolution in sight. The exchange offer route, which the government is now considering, could break the deadlock by going directly to all bondholders, but it requires a price that private creditors will accept without the ad hoc committee’s endorsement. That is a harder transaction to execute than a negotiated settlement, but it may now be the only realistic path to resolution.
Source: CNBC Africa, May 28 2026 / Bloomberg, May 28 2026
