(Bloomberg) -- Ethiopia reached an in-principle agreement with bilateral creditors to temporarily suspend debt payments and plans to start talks to restructure its $1 billion eurobond maturing next year.

The Horn of Africa nation has been seeking to rework its liabilities since 2021 as a civil war in the northern Tigray region soured investor sentiment and sapped economic growth. China recently agreed separately to a pause in repayments and the government is also working toward an International Monetary Fund program. 

“The agreed interim debt-service suspension aims at remedying the current situation and providing the country with appropriate breathing space for the period 2023 and 2024,” the finance ministry said in an emailed statement on Wednesday. 

The redemption terms will “maximize debt-service relief during the prospective IMF program years while avoiding a bunching of maturities after the program,” it said.

Ethiopia is seeking to renegotiate its obligations through the Group of 20’s Common Framework, which has started to gain momentum after progress in restructuring by Zambia and Ghana.

Yields on the eurobond climbed 195 basis points by 3:30 p.m. in Addis Ababa, with investors “selling the fact” said Simon Quijano-Evans, chief economist, chief economist at Gemcorp Capital Management in London.

“You’re going to see a lot of volatility in the bond from now on, with the market second-guessing what official creditors have agreed on, especially given the common framework backdrop,” he said, adding that with the next coupon payment due on Dec. 11, the country isn’t in default.  

“The cat is now finally out of the bag,” said Quijano-Evans. “Let’s hope it can run quicker than that seen in other common framework countries. Private bondholders are bound to work fast as everyone wants to move on.” 

--With assistance from Colleen Goko.

(Updates with details, analyst’s comment from sixth paragraph)

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