In a pivotal move to address its financial obligations, Ethiopia has reached a preliminary agreement with its Official Creditor Committee (OCC) to restructure $8.4 billion of its debt. This arrangement offers the nation an extension on debt maturities and approximately $2.5 billion in debt service relief through 2028, aligning with its International Monetary Fund (IMF) program.

The East African country defaulted in December 2023, prompting this restructuring under the G20’s Common Framework, designed to expedite debt treatments for poorer nations. Despite this extension, the agreement does not include a reduction in the principal amount owed, a point of contention with bondholders of Ethiopia’s $1 billion Eurobond. These bondholders argue that Ethiopia faces a liquidity issue rather than a solvency crisis and have rejected the proposed 18% haircut.

William Roos, co-chair of the OCC and the Paris Club of creditor nations, emphasized that Ethiopia's capacity to repay is more favorable compared to peers like Zambia or Ghana. However, transparency concerns persist among bondholders, though Roos noted ongoing dialogue and collaboration with key creditors, including China, France, the UAE, Kuwait, and Poland. The latter three are negotiating separately.

The finalization of this debt restructuring deal is anticipated within months, marking a significant step for Ethiopia as it navigates its financial challenges and seeks to restore economic stability.