Bondholders have reached a debt restructuring deal with the Ethiopian government that could see them paid 28% more than government creditors. The deal comes after some bondholders, including VR Capital and Farallon Capital Management, threatened to sue Ethiopia in the UK.
Debt Justice has calculated that the deal means bondholders could be paid 105.9% of what they originally lent, in net present value terms. In contrast, government creditors are being repaid 82.7% of what they originally lent.[1]
Tim Jones, Policy Director at Debt Justice said:
“Bondholders have used the threat of suing in the UK to push Ethiopia into this bad deal. Official creditors should reject it and instead demand a better deal for the Ethiopian people. Private lenders charging sky-high interest rates should never walk away with more than government creditors after debt relief. The UK must act now and introduce legislation to prevent any creditor seeking more than other creditors in the courts, removing the threat of legal action.”
Under the deal, bondholders will be paid 2.5% of Ethiopia’s exports over a set amount, with a maximum amount of $35 million every year, between 2028 and 2037. However, if the maximum is not reached in one year, it can be taken from any excess in a previous year, making the maximum amount more likely to be met.
The deal also reduces the amount of principal repayments Ethiopia has to make in 2029, if Ethiopia’s exports are significantly less than expected by the IMF. However, even if there was a full reduction in principal payments, and no additional payments in any year, bondholders would still be paid more than government creditors.
Notes
Full calculations are available in the spreadsheet at: https://debtjustice.org.uk/wp-content/uploads/2026/01/Ethiopia-calculations_01.26.xlsx