JOHANNESBURG (Reuters) – Ethiopia’s agreement with its bilateral creditors, excluding China, to suspend debt payments until 2025 could be invalidated if Ethiopia does not obtain an IMF loan by March 31, 2024, the International Monetary Fund said in Paris. Advanced.
The debt service suspension for 2023 and 2024, which the central bank governor says will save the country $1.5 billion, applies to loans agreed before November 10. The pending payments will be made from 2027 to 2029 after a grace period from 2025 to 2026. The Paris Club said in a statement, noting that the agreement was reached on November 23.
An IMF spokesman said that discussions with the Ethiopian government are continuing and another mission to Addis Ababa is likely to take place early next year.
Ethiopia’s economy is under pressure from double-digit inflation and a shortage of foreign currency, 13 months after the federal government and forces from the northern Tigray region signed a truce to end a two-year civil war.
The government requested a debt recast in early 2021 under the G20 Common Framework restructuring process, but progress was initially delayed by the conflict.
“This debt freeze… will provide limited liquidity relief ahead of discussions on broader debt treatment,” said the Paris Club, which includes French Treasury officials and acts as a secretariat for bilateral creditors.
“These discussions will gain momentum once the Ethiopian authorities and the IMF agree on the parameters of the IMF programme,” he added.
The Paris Club said that if Ethiopia does not obtain an IMF staff-level agreement by March 31, the official creditors committee “reserves the right to declare the suspension null and void.”
The government announced the agreement last month, along with announcing its intention to restructure its only international bond, worth $1 billion, due in December 2024.
In August, it said China would suspend debt payments due in the fiscal year ending July 7.
Investors in the 2024 bonds, a group of which offered a maturity extension earlier this year, are watching to see if the Dec. 11 coupon, which research firm Tellimer estimates at $33 million, will be paid.
The Paris Club saying that a debt standstill would be taken into account in the overall restructuring “could imply that the OCC could expect private creditors to provide reliefs that are proportionately larger than net present value to compensate for their lack of liquidity.” Engagement,” Patrick Curran of Telemer said in a note.
That “could be a point of contention,” he said, noting that Zambia’s official creditors had rejected the agreement the country reached with bondholders because they disagreed that it complied with “transactionability.”
The Paris Club said that 10 of its members are on Ethiopia’s official creditors’ committee, which is co-chaired by France and China, which is not a member of the Paris Club. The other non-Paris Club members of the committee are India, Kuwait, Poland, Saudi Arabia and Turkey.
The IMF spokesman added: “We welcome the recent announcement of a temporary freeze agreement with official creditors.” “This will provide great relief to Ethiopia and represents an important step towards addressing the external debt that is part of the authorities’ reform program that we are discussing.”
(Reporting by Rachel Savage, additional reporting by Rodrigo Campos) Editing by Alex Richardson, Toby Chopra and Kirsten Donovan
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