Ethiopia bondholders say IMF report ‘artificially’ creates solvency issue
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(Reuters) – A committee of Ethiopia’s bondholders said on Monday the International Monetary Fund’s latest report on the country contained flaws that “artificially” outline a solvency issue, a scenario that would require lenders to grant debt relief.
The East African nation defaulted on its sole $1 billion bond in December 2023, and negotiations over restructuring the debt have been slow and acrimonious.
Monday’s criticism over the report is the latest disagreement between the creditor committee, the IMF and Ethiopia over whether the country is facing a liquidity issue, meaning it might only need more time to pay, or a solvency issue, which could require debt writedowns known as haircuts.
“The Committee disagrees with the conclusions reached by the IMF in the staff report,” it said in a statement.
The IMF’s analysis “incorporates export projections and reserve adequacy targets that do not align with the Committee’s assessment of Ethiopia’s economic fundamentals”, it said.
The committee specifically said the IMF’s latest report “fails to acknowledge significant improvements in Ethiopia’s macroeconomic situation”, and that it had undervalued increases in key exports, namely gold and coffee.
The conclusions of the report were “artificially creating a solvency issue for Ethiopia”, the committee said, adding that they also contained “significant flaws”.
Neither the IMF nor the Ethiopian government responded to requests for comment.
Officials in Africa’s second most populous nation waited to restructure its international debt until it had secured a $3.4 billion IMF bailout in July last year, and began implementing far-reaching reforms, including the floatation of its birr currency , as a result of that agreement.
The government has said bondholder losses are unavoidable, citing the IMF’s debt sustainability analysis, and last year proposed an 18% haircut.
Finance Minister Ahmed Shide said earlier this month talks with creditors on the debt overhaul are in the “final stages“.
Some World Bank staff have also raised questions about the IMF analysis that underpins Ethiopia’s debt restructuring. The IMF has responded by saying the World Bank signed off on the analysis.
The bondholder committee, which represents investors who account for more than 40% of the holdings, said it reserved the right to take action, including potential proceedings in English courts, to enforce Ethiopia’s obligations to repay the outstanding debt
Source: reuters.com
