Ethiopia has taken a significant step toward resolving its debt crisis by signing its first bilateral debt restructuring agreement with France, according to the state-run Ethiopian News Agency.
The agreement follows the country’s default on its external debt in December 2023 and represents a crucial milestone in ongoing negotiations with official creditors under the G20 Common Framework initiative.
The deal with France comes after Ethiopia reached a collective restructuring agreement with official creditors last July, coordinated under the Common Framework, which aims to provide debt relief to countries facing unsustainable external obligations. France, alongside China, chairs the official creditors’ committee overseeing the restructuring process. The bilateral arrangement provides Ethiopia with additional financial support of 81.5 million euros (approximately US$89.4 million), earmarked for economic reforms and technical assistance to strengthen fiscal management and public sector capacity.
Ethiopia’s agreement with France also provides broader cash flow relief to the country, complementing the collective restructuring of its debt owed to official lenders. The broader framework under the Common Framework is expected to unlock a total of US$3.5 billion in cash flow relief, allowing Ethiopia to redirect resources toward priority sectors, including infrastructure, healthcare, and social development, while stabilizing its economy.
The restructuring deal highlights the challenges Ethiopia faces in balancing negotiations with official creditors and Eurobond holders. Earlier, Ethiopia’s attempts to restructure a US$1 billion Eurobond were blocked by official creditors, who argued that the draft deal did not meet the Comparability of Treatment principle under the G20 Common Framework. This principle ensures that all creditors, official or private, are treated fairly and that no group receives preferential treatment. While Eurobond holders have signaled potential legal action due to delays in securing a restructuring agreement, the France deal provides a template for reaching consensus with other official lenders.
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Analysts note that Ethiopia’s default and ongoing debt negotiations underscore the vulnerabilities of highly indebted emerging economies. With external debt pressures mounting, the country has faced liquidity constraints that threaten public investment and social spending. The bilateral agreement with France, coupled with the collective creditor framework, offers a path toward debt sustainability while preserving essential development programs.
French officials have emphasized that the support package, including the 81.5 million euros in additional financing, is designed to assist Ethiopia in implementing structural reforms, improve economic governance, and enhance fiscal transparency. Technical assistance is expected to strengthen institutional capacity, helping the country meet its fiscal targets and implement policies that promote sustainable growth.
Ethiopia’s debt restructuring under the Common Framework is part of a broader global effort by the G20 to assist heavily indebted countries in Africa and elsewhere. The initiative seeks to coordinate restructuring agreements across official creditors while ensuring that private creditors participate on comparable terms. By securing bilateral agreements like the one with France, countries such as Ethiopia can stabilize their finances and regain market confidence while addressing long-term development needs.
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The successful conclusion of the France deal is expected to accelerate negotiations with other bilateral creditors and potentially facilitate discussions with Eurobond holders. As Ethiopia works to rebuild trust with international investors, the agreement also signals a commitment to economic reform, fiscal discipline, and debt transparency.
For Ethiopia, the restructuring represents both a financial lifeline and an opportunity to stabilize its economy amid a challenging regional and global environment. With cash flow relief and targeted technical assistance, the country can focus on critical infrastructure projects, social programs, and broader economic reforms, helping to safeguard growth and development prospects.
The France-Ethiopia agreement marks a key milestone in the country’s path to debt sustainability, reflecting both the challenges and opportunities of debt management in emerging economies. While hurdles remain with private creditors, the deal strengthens Ethiopia’s negotiating position and offers hope for a more stable economic future.
