Addis Ababa, Ethiopia · July 2025 — The Ethiopian government signed a memorandum of understanding (MoU) with its Official Creditor Committee (OCC) in July 2025, formalising the terms of official bilateral debt treatment under the G20 Common Framework. The agreement, covering over US$8 billion in public liabilities, represents a critical milestone in a restructuring process that has stretched over four years and tested the limits of the international sovereign debt architecture.
The OCC, co-chaired by China and France, includes Ethiopia's major bilateral creditors. The MoU outlines a framework for the orderly treatment of official debt, providing relief on repayment terms that is consistent with the IMF's debt sustainability analysis. The agreement follows an agreement in principle reached in March 2025, which itself came after years of delays that drew sharp criticism from debtor nations and civil society organisations alike.
A Long and Winding Road
Ethiopia formally requested debt treatment under the G20 Common Framework in early 2021, making it one of the first countries to seek restructuring through the mechanism established in 2020. The process, however, was anything but swift. The country defaulted on its US$1 billion Eurobond due in December 2024 — the first African sovereign Eurobond default since Zambia's in 2020 — triggering a complex parallel restructuring process involving both official and private creditors.
The delays in Ethiopia's case have been attributed to several factors: the sheer complexity of coordinating among a diverse group of creditors including China, Paris Club members, and non-traditional lenders; the civil conflict that engulfed northern Ethiopia from 2020 to 2022; and the structural challenges of the Common Framework itself, which lacks a binding timeline for creditor coordination.
The G20 Common Framework Under Scrutiny
Ethiopia's case, alongside those of Zambia and Chad, has become a litmus test for the G20 Common Framework — the debt restructuring mechanism created by the G20 in November 2020 to address sovereign debt crises in low-income countries. The framework was designed to bring together traditional Paris Club creditors, non-Paris Club lenders such as China, and private creditors under a coordinated process.
The slow pace of the framework has drawn sustained criticism. Zambia's restructuring, initiated after its November 2020 default, took over three and a half years to reach resolution. Ethiopia's process has been similarly protracted. Critics argue that the framework's lack of a binding timeline, its reliance on consensus among creditors with divergent interests, and the absence of an automatic stay on litigation during negotiations create unnecessary uncertainty for debtor nations.
IMF Programme and Economic Reform
The debt restructuring is being conducted alongside a four-year, US$3.4 billion IMF Extended Credit Facility programme approved in July 2024. The IMF programme is designed to stabilise Ethiopia's economy and restore debt sustainability through a combination of fiscal consolidation, exchange rate reform, and structural adjustment.
In late July 2024, Ethiopia implemented a major exchange rate reform, moving to a market-determined exchange rate system. The birr depreciated significantly, leading to inflationary pressures but also improving export competitiveness and unlocking access to IMF financing. The reform was widely seen as a necessary step toward macroeconomic stability, though its social costs have been substantial.
The IMF has linked continued disbursement under the programme to a debt restructuring that meets both debt sustainability criteria and fair burden-sharing standards. This linkage has created additional pressure on Ethiopia to reach agreements with all creditor classes — official bilateral, commercial bank, and bondholder — that are consistent with the comparability of treatment principle.
Challenges Ahead: The Eurobond Impasse
While the MoU with official creditors marks significant progress, Ethiopia's debt restructuring is far from complete. Negotiations with private commercial creditors and Eurobond holders have proven particularly challenging.
The OCC has signalled that the terms of the Eurobond restructuring agreed in principle with bondholders in January 2025 do not fully comply with the comparability of treatment principle. This determination forced Ethiopia to pause implementation of the Eurobond restructuring, creating a new obstacle in an already complex process.
Ethiopia has stated it will resume negotiations with the Ad Hoc Committee of bondholders to revise the financial terms, aiming for a solution that satisfies both the comparability of treatment principle and IMF programme commitments, while remaining acceptable to private investors.
Broader Implications for Africa's Debt Architecture
Ethiopia's restructuring takes place against the backdrop of a broader African debt crisis. Approximately 20 to 22 low-income African countries are classified as being in or at high risk of debt distress as of 2025. Debt-servicing costs have surged, with many nations requiring massive annual outlays estimated at around US$170 to 175 billion for 2025 and 2026.
South Africa's G20 presidency in 2025 elevated the debt issue to the top of the global agenda. An Africa Expert Panel, chaired by former Finance Minister Trevor Manuel, was established to provide recommendations to the G20 on debt sustainability, the high cost of capital, and reform of the international financial architecture. The panel's report, Growth, Debt and Development: Opportunities for a New African Partnership, called for faster and more effective debt treatment under the Common Framework, improved transparency, and a structural shift from aid-dependency to investment-driven growth.
The Ethiopian case will continue to serve as a critical test of whether the G20 Common Framework can deliver timely, equitable, and sustainable debt relief — or whether more fundamental reforms to the sovereign debt architecture are needed.
Sources
- Birr Metrics, Ethiopia Halts Eurobond Restructuring After Official Creditors Flag Compliance Gap, January 2026. Available at:
- Capital Ethiopia, Ethiopia aims to complete debt restructuring with commercial creditors by October 2026, 6 May 2026. Available at:
- Ethiopian Ministry of Finance, Ethiopia announces assessment of Official Creditor Committee, 2026. Available at:
- CGD, Zambia: A Case Study of Sovereign Debt Restructuring Under the G20 Common Framework. Available at:
- African Development Bank, New G20 Expert Panel Report Calls for Coordinated Debt Relief and Increased Investment, 2025. Available at:
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