(Bloomberg) -- Ethiopia’s major creditors created a panel to revamp some of the nation’s about $30 billion of overseas debt, according to people with knowledge of the matter.
An announcement on the formation of the committee will be made within days after the Ethiopian authorities and the creditors agree on pending terms, the people said, asking not to be identified because the matter is not yet public.
A debt overhaul committee marks a breakthrough in a global push to restructure the debt of poor countries struggling with the fallout from the coronavirus pandemic, and follows a call by the International Monetary Fund for creditors to convene after months of delay. Formal talks with Ethiopia, the biggest economy yet to seek a debt overhaul under the Group of 20’s so-called common framework, could also set the roadmap for any talks with private creditors.
A clear path forward from the creditors, among them China and several European countries, would help the IMF determine how to engage with Ethiopia on an economic recovery. The lender’s executive board has yet to approve disbursements from a $2.1 billion program, despite reaching staff-level agreements. The IMF on Thursday said it is “too soon” to engage with Ethiopia over any possible new program, with one of the existing two expiring this month.
The nation’s external debts increased 2% to $29.5 billion at the end of June.
Ethiopia’s announcement on Jan. 29 that it plans to restructure its debt triggered a selloff of its $1 billion of Eurobonds. The yield on the 2024 debt has risen almost 500 basis points since then, to trade at a record high of 11.42% on Friday.
Ethiopia is among at least three African governments that have approached creditors for debt relief to cushion their nations against the economic fallout from the coronavirus pandemic. In Ethiopia, the situation was exacerbated by a civil war in its northern Tigray region, which depleted government finances and has led the U.S. to weigh sanctions.
Ethiopia’s Finance Ministry didn’t immediately respond to calls seeking comment on Friday.
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