Ethiopia faces challenges as it integrates into BRICS
In December 2023, Ethiopia informed its bondholders that it would not be able to make a $33 million repayment on its $1 billion Eurobond loan.
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Editor’s note: This story is part of Mariblock’s “State of Fiat” coverage. Digital assets such as bitcoin are seen as competitors to central bank money. Therefore, we consider informing our audience of the state of their local currencies worthwhile.
Ethiopia’s integration into BRICS (Brazil, Russia, India, China, and South Africa) has encountered some early difficulties.
Just weeks after officially joining the bloc, Ethiopia defaulted on a Eurobond payment.
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The details
- According to reports, Ethiopia was unable to make payment for a Eurobond loan, resulting in a “restricted default” rating by Fitch, an American credit rating agency.
- Ethiopia is currently discussing with the International Monetary Fund (IMF) to secure an aid package to support the economy.
Be smart: A “restricted default rating” is a credit rating by Fitch, a rating agency. It indicates that a company or country has failed to meet certain financial obligations but is still making payments.
Key quote
- Ethiopia’s Finance Minister Ahmed Shide told Chinese state broadcaster CGTN:
“Ethiopia will continue to cooperate with its traditional partners. But Ethiopia will also significantly improve its relations with new partners, such as the BRICS countries, whose economies are growing quickly.”
Key context
- In December 2023, Ethiopia informed its bondholders that it would not be able to make a $33 million repayment on its $1 billion Eurobond loan.
- Despite efforts to renegotiate the bond terms before the coupon payment deadline, the East African country could not agree.
Before now
- The BRICS summit in Johannesburg last August marked the entry of new countries into the bloc, including Ethiopia, whose full membership came into full effect on January 1.
- Ethiopia’s economic woes stem from the after-effects of the COVID-19 pandemic, climate change, the Russia-Ukraine war and internal conflicts in the Tigray region in the country.
- Amidst its economic struggles, Ethiopia sees BRICS membership as a potential advantage, offering economic and political bolsters within the bloc.
