Dec 14 (Reuters) – Ethiopia’s credit rating was downgraded further into junk territory on Thursday by the Fitch Ratings agency, which cited an “increased likelihood” of default.<\/p>\n
The east African country failed to pay a coupon on its single outstanding $1 billion Eurobond which had been due on Dec. 11, saying last week it could not make the payment.<\/p>\n
Fitch cut Ethiopia’s rating to “C” from the “CC” it downgraded Africa’s second most populous country to last month.<\/p>\n
The agency does not assign outlooks to sovereigns rated “CCC+” or below but said it would downgrade Ethiopia to “RD”, or restricted default, if it did not pay the coupon within a 14-day grace period.<\/p>\n
Ethiopia’s economy is still reeling from high inflation, a hard currency shortage and growing external debt repayments more than a year after the federal government and rebel forces from the northern Tigray region signed a truce to end a two-year civil war.<\/p>\n
Ethiopia requested debt relief under the G20’s Common Framework in early 2021, but progress was initially delayed by the war. Fitch noted that Ethiopia had agreed a debt service suspension with its official creditors.<\/p>\n
“Official-sector debt treatment would not be judged a distressed debt exchange under Fitch’s sovereign rating criteria but official creditors may seek comparable treatment for private-creditor claims under the Common Framework,” it said.<\/p>\n
The government on Thursday held a call for investors in the bond, which matures in December 2024, after talks with a group of bondholders broke down.<\/p>\n
Earlier this year, it asked the IMF for a new lending program worth $2 billion. The sides are yet to strike a deal but the IMF said discussions were ongoing and staff would likely visit Ethiopia in early 2024.<\/p>\n
Reporting by Shanima A in Bengaluru and Rachel Savage in Johannesburg; Editing by Shounak Dasgupta, Kirsten Donovan<\/p>\n","protected":false},"excerpt":{"rendered":"
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