After more than five years of negotiations under the G20’s Common Framework, Ethiopia has reached an agreement in principle with an Ad Hoc Committee of bondholders to restructure its $1 billion Eurobond. The deal, announced on June 29, 2026, follows a period of intense pressure, including repeated threats of legal action in UK courts by private creditors.
While the agreement marks a significant step toward resolving Ethiopia’s long-standing debt crisis, it has drawn sharp criticism from advocacy groups like Debt Justice, who argue that the terms unfairly prioritize private investors over bilateral government creditors.
The restructuring involves a 12% haircut on the original principal, reducing the debt to $880 million to be repaid between 2026 and 2029. Additionally, Ethiopia has agreed to pay approximately $99.375 million in missed interest payments from 2023 and 2024, along with a $5 million consent fee.
A central component of the deal is the “New Money Warrant,” which grants bondholders the right to subscribe to a future international bond issue of up to $1 billion. If Ethiopia chooses not to issue these future bonds, it must pay a cash settlement capped at $90 million, a provision that significantly inflates the total recovery for private lenders.
Debt Justice, a prominent UK-based charity, estimates that the net present value of this deal means bondholders will be repaid roughly 90% of their original loan, excluding historical interest. According to their analysis, this recovery rate is 9% higher than what government creditors, such as France and China, are expected to receive under the current framework. If the maximum $90 million cash fee is triggered in lieu of the future bond issuance, the payout to private bondholders could climb to as much as 17% more than what government lenders receive, raising serious questions about the “comparability of treatment” principle that the G20 Common Framework is intended to uphold.
The negotiation process has been plagued by deep tensions, with bondholders frequently using the threat of litigation to improve their terms. On four separate occasions—most recently on June 1, 2026—the Ad Hoc Committee warned of legal action in the UK. This strategy has been widely condemned by global financial authorities. Xuan Changneng, Deputy Governor of the People’s Bank of China, recently noted in the Paris Club Annual Report that “coordinated efforts are needed on legal and technical fronts to curb malicious litigation by bond investors,” emphasizing the need to safeguard the integrity of sovereign debt restructurings.
Tim Jones, Policy Director at Debt Justice, argues that the outcome illustrates the systemic imbalance in how debt relief is handled. He stated that bondholders successfully leveraged the threat of UK legal action to “wring more money out of the Ethiopian people.” As Ethiopia looks to implement this deal through an exchange offer in the coming months, there are growing calls for the UK to use its upcoming 2027 G20 Presidency to reform international debt laws.
