Ethiopia has struck a preliminary deal with key bondholders to restructure its defaulted $1 billion international bond, the finance ministry said on Monday, moving closer to resolving a years-long debt crisis.
The case is seen as a key test of the G20’s Common Framework, launched during the COVID-19 pandemic to streamline debt workouts but marked by divisions between Western lenders, China and private investors that have slowed and complicated restructurings.
Under the proposal, Ethiopia will issue an $880 million bond to be repaid in instalments through 2029 at a 6.15% interest rate, as previously agreed with bondholders. It will also pay $99.4 million in missed coupons and a consent fee.
The deal also includes a “New Money Warrant” giving bondholders the option to buy into a future Ethiopian bond of up to $1 billion at a market-linked interest rate. Ethiopia can choose to settle the warrant in cash instead, capped at $90 million.
Samir Gadio, head of Africa strategy at Standard Chartered, said the warrant was the key element bridging the gap between the parties.
“It’s a deal that basically will keep all parties happy,” he said, adding that if Ethiopia exercises its buy back option on the warrant, bondholders would end up marginally better off than under the bond terms alone.
Ethiopia said the International Monetary Fund had signed off on the warrant structure as consistent with its debt sustainability targets. The statement added that co-chairs of its Official Creditor Committee — China and France — had raised no objections, though the deal was still subject to approval by the wider committee.
The IMF and the bondholder group did not immediately comment.
G20 COMMON FRAMEWORK
Ethiopia’s bonds jumped 2.9 cents after the preliminary deal, to bid at 108.423 cents on the dollar, their highest level since January, Tradeweb data showed .
The agreement caps a lengthy and turbulent restructuring. Ethiopia signalled in January 2021 that it would seek debt relief under the Common Framework before defaulting in December 2023. It reached an agreement in principle with Official Creditor Committee in March 2025, but talks with commercial creditors proved more difficult.
A January 2026 bondholder deal later collapsed after objections from official creditors, and investors rejected a revised offer in late May, with some threatening legal action.
Monday’s agreement made no mention of potential legal action.
Ethiopia’s case has exposed deep tensions within the G20’s Common Framework. Bondholders and official creditors clashed over comparability of treatment — a principle requiring all sides to accept similar losses.
Bondholders argued Ethiopia’s improving outlook did not justify the losses demanded. Ethiopia’s finance ministry criticized the sequencing of negotiations in the framework, arguing creditors and the IMF needed to engage bondholders earlier.
The Paris Club of creditor nations said in its annual report released last week that the framework must deliver faster and bring all creditors along in delivering comparable efforts.
The Ethiopia bondholder group – the Ad Hoc Committee – involved in the talks represents holders of roughly 45% of the outstanding notes.
Ethiopia said it plans to implement the deal through an exchange offer in the coming months, once remaining non-financial terms are agreed and it has received wider Official Creditor Committee signoff.
