The East African nation, which defaulted in December 2023, announced a preliminary agreement with its Official Creditor Committee (OCC) in March to restructure $8.4 billion in debt - a key step for it to emerge from sovereign default.

Under the deal, Ethiopia will get around $2.5 billion in debt service relief over the course of its International Monetary Fund programme, which runs out in 2028.

"We reduce the stock of debt through an extension of maturities and also reducing specifically the payments during the IMF programme period," said William Roos, co-chair of Ethiopia's OCC.

Roos said payment extensions, lowering the debt service during the IMF programme and cutting interest levels enabled them to reduce the debt stock in "net present value" terms, which measures the value of a loan including future instalments, even without a haircut.

Ethiopia, which is restructuring under the G20 Common Framework scheme that is meant to speed up poor countries' debt treatments, is in a standoff with holders of its sole $1 billion Eurobond. They say Ethiopia does not need debt "haircuts" but instead faces a liquidity, or short-term cash flow, issue.

Bondholders have firmly rejected the country's proposed 18% haircut.

Under its current IMF programme, Ethiopia must reduce its debt service by $3.5 billion until 2028 in order to make its debt "sustainable".

In February, bondholders said the IMF's assessment contained flaws that "artificially" created a solvency issue, partially by undervaluing gold and coffee exports.

--Reuters--