International investors have formally warned Ethiopia’s government of potential legal action in English courts next month.
A steering committee representing holders of Ethiopia’s sole international bond issued a pre-action letter ahead of IMF and World Bank meetings.
The letter signals intent to sue, a required step before launching proceedings in England’s commercial courts.
Sources familiar with the matter said the warning followed the collapse of a debt restructuring agreement earlier this year.
Ethiopia and its bondholders remain locked in dispute over a $1 billion international bond.
Talks broke down after official creditors rejected a draft deal, citing lack of comparable treatment for all stakeholders.
The decision in January effectively unraveled months of delicate negotiations over the country’s debt obligations.
Bondholders previously warned they may pursue litigation to recover unpaid principal and interest due on the bond.
They reiterated their position after finding themselves, in their words, without viable alternatives for repayment enforcement.
Despite the escalating tensions, representatives from both sides met last week in Washington on the IMF sidelines.
The discussions took place during the annual spring meetings involving global financial institutions and policymakers.
However, no breakthrough was reported, leaving the dispute suspended in a fragile and increasingly confrontational state.
Ethiopia’s government has not issued any public response to the legal warning or related developments.
The standoff underscores mounting pressure on developing economies navigating complex debt restructuring negotiations.
Financial markets are now watching closely as the prospect of court action draws nearer.