Ethiopia struck a preliminary deal with key bondholders on Monday to restructure its defaulted $1 billion international bond.
The breakthrough signals a major step toward resolving a turbulent, years-long debt crisis that gripped the East African nation.
Under the fresh proposal, Ethiopia will issue a new $880 million bond to be repaid in installments through 2029.
The government will also pay nearly $100 million covering missed coupon payments alongside an additional consent fee.
A novel “New Money Warrant” mechanism successfully bridged the deep, stubborn divide between the negotiating parties.
This unique clause offers investors a future option or a cash settlement capped at $90 million.
The International Monetary Fund formally signed off on the agreement, declaring the deal consistent with economic sustainability goals.
Market confidence surged immediately following the announcement, sending the bond price jumping significantly on Monday.
The resolution provides vital relief for a restructuring process initially launched during the pandemic in January 2021.
Ethiopia previously plunged into a formal default in December 2023 after struggling under immense economic pressure.
The case served as a critical, high-stakes test for the G20’s pandemic-era Common Framework system.
Deep institutional friction frequently emerged as Western lenders, China, and private investors clashed over loss-sharing terms.
A previous restructuring agreement dramatically collapsed in January 2026 after official creditors raised sharp objections.
Furious investors then rejected a revised proposal in May, with some creditors even threatening imminent legal action.
Monday’s landmark agreement made no mention of litigation, offering a rare moment of harmony for all sides.
The official creditor committee, co-chaired by China and France, must still grant final approval to the deal.