Ethiopia’s debt plans may spare private creditors

Significance

The announcement provoked panic among some bondholders but their concerns appear unfounded given Ethiopia's overall debt sustainability and the government's ability to engage with Chinese lenders on favourable terms.

Impacts

• Other African governments will follow Ethiopia's progress before requesting debt restructuring.
• Ratings agencies may need to tweak their methodologies to account for such relief, lest they needlessly downgrade proactive sovereigns.
• Pressure on Chinese lenders may rekindle Beijing's calls for the IMF to issue new Special Drawing Rights to boost international liquidity.