Ethiopia Fails to Pay Coupon, Becoming Latest African Defaulter

[JayDubya]

Ethiopia Fails to Pay Coupon, Becoming Latest African Defaulter​

Ethiopia became Africa’s latest defaulter after it failed to make an interest payment following the end of a grace period on Monday.

The Horn of Africa nation had to pay a $33 million coupon on Dec. 11. The government didn’t want to make the payment because it “wants to treat all creditors in the same way,” Ahmed Shide, Ethiopia’s minister of finance said on state TV on Thursday.

Hinjat Shamil, senior reform advisor at the Ministry of Finance confirmed Monday that the payment had not, and will not be paid. Ethiopia reached an agreement with bilateral creditors last month to suspend debt payments.

The default puts Ethiopia among a growing number of developing nations that have defaulted on Eurobonds in recent years, including Zambia, Ghana and Sri Lanka.

https://finance.yahoo.com/news/ethiopia-fails-pay-coupon-becoming-152612647.html

 

[pmbug]

Rising interest rates going to make debt service harder for nations same as people I guess.

 

[Casey Jones]

Well, now, wait a second. A bond ALREADY ISSUED (set of bonds, bond issuance) is at an interest rate set at sale. It's resale rate may vary, depending on what the current prevailing interest rate is, vis a vis the rate promised on the bond. But the Fed's pfuk-pfuk with interest rates lately, has nothing to do with debt that's already been sold, and must be serviced at rates announced in the prospectus.

 

[Voodoo]

Well, now, wait a second. A bond ALREADY ISSUED (set of bonds, bond issuance) is at an interest rate set at sale. It's resale rate may vary, depending on what the current prevailing interest rate is, vis a vis the rate promised on the bond. But the Fed's pfuk-pfuk with interest rates lately, has nothing to do with debt that's already been sold, and must be serviced at rates announced in the prospectus.

They can't roll the debt forward at higher rates. IE continually refinancing expecting a savings or being able to increase the amount of the loan.

 

[Casey Jones]

True. But we're not talking new issuances. We're talking about the coupon, the interest-payment due to holders, on outstanding debt.

That Ethopia's debt-driven budget is stressed because of the recent cost of borrowing money, I can understand. To the extent I can understand a debt-based operation at all.

But missing the interest payments is not because of the FRB interest increases. It may be a second-order cause, but THE cause here is, the numbers aren't working, and probably because of irresponsible planning.

 

[searcher]

How Ethiopia could trigger Africa's deadliest conflict​

Jan 12, 2024

A new rebellion is growing in #Ethiopia. Ethnic militias have seized towns, cities, and even an airport. If left unchecked, #Africa could witness its most deadly conflict in over a century.


21:32

 

[pmbug]

Amazing how this is heating up at the same time Iran backed Houthi rebels are attacking ships from the other side of the Red Sea in Yemen.

 

[searcher]

Ethiopia’s deal with Somaliland upends regional dynamics, risking strife across the Horn of Africa
The Horn of Africa ushered in the new year with news of a deal that would ensure that diplomatic relations in the region got off to a bumpy start in 2024. Ethiopia, it was announced on Jan. 1, had signed a memorandum of understanding with the breakaway region of Somaliland, opening the door to an agreement to exchange a stake in flagship carrier Ethiopian Airlines for access to the Gulf of Aden.

Such transactions of economic reciprocity are generally routine, as scholars of international relations and law like myself are aware.

But this deal has another element. It intertwined sea access with Ethiopia’s formal recognition of Somaliland – and this has sparked quite a diplomatic stir. Ethiopia’s neighbor Somalia has demanded that the agreement be immediately retracted. In Somaliland itself, the deal has been greeted by protest and the defense minister’s resignation.

More:

Ethiopia's deal with Somaliland upends regional dynamics, risking strife across the Horn of Africa

Somalia has demanded that a memorandum of understanding – which would see Ethiopia gain access to the Red Sea via a Somaliland port – be ripped up.

theconversation.com