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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- 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.
- 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.”
- 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.
- 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.