Reacting to news that bondholders have agreed a debt restructuring deal with Ethiopia, Tim Jones, Policy Director at Debt Justice, said:
“Bondholders have successfully used the threat of legal action in the UK to wring more money out of the Ethiopian people. This deal is better for Ethiopia than proposed in January 2026 but bondholders will still be paid up-to 17% more than government creditors.”
Tim Jones continued:
“It has taken Ethiopia over five years to get this limited debt relief through the G20’s Common Framework. The UK must use its G20 Presidency in 2027 to create a debt relief scheme that works fast, fairly and effectively. Central to this must be legal changes to stop private lenders using the threat of legal action to delay and undermine debt relief.”
Ethiopia’s bondholder committee has threatened legal action on four occasions, most recently on 1 June 2026.[1] In the Paris Club Annual Report released last week, Xuan Changneng, Deputy Governor of the People’s Bank of China, said: “Coordinated efforts are also needed on legal and technical fronts to curb malicious litigation by bond investors, thereby safeguarding the foundation and credibility of the Common Framework.”[2]
Ethiopia’s deal with bondholders comes in two parts.[3] First is the restructuring of the original bond. This consists of:
- A 12% haircut, reducing the principal to be paid to $880 million (between 2026 and 2029)
- An interest rate of 6.15% (compared to 6.625% on the original bond)
- Full payment of 3 missed interest payments in 2023-2024, totalling $99.375 million (but not missed interest payments in 2025 and 2026)
- A consent fee of $5 million
Debt Justice estimates that this means the net present value of the debt, dated from 2023, is $900 million. This means bondholders are being repaid 90% of what they were lent (not including the interest paid from 2015-2023). This is 9% more than government creditors such as France and China are being paid.
In addition, bondholders are getting the right to buy a new Ethiopian Eurobond, with an 8.5%-9% interest rate. If bondholders offer to buy the new bond, but Ethiopia does not then issue it, the East African country has to pay the bondholders a fee. The cost of this fee is to be determined but has been capped at a maximum of $90 million. If the $90 million fee were paid, this would mean bondholders would get paid 17% more than governments.
In comparison, under the last deal proposed by the Ethiopian government, bondholders would have been paid 4% more than governments. Under the January 2026 deal, rejected by government creditors, bondholders would have been paid 28% more than governments.
Notes
[4] All Debt Justice calculations are available in the spreadsheet at https://debtjustice.org.uk/wp-content/uploads/2026/06/Ethiopia-calculations_29.06.26.xlsx