UPDATE 1-S&P Pushes Ethiopia’s Ratings Into Junk Territory Over Delayed Debt Restructuring

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(Add information on debt restructuring, Tigray conflict, quote from agency statement)

Sept. 24 (Reuters) – Rating agency S&P Global downgraded Ethiopia’s sovereign rating to “CCC +” from “B-” on Friday, citing increased political instability and delays in debt restructuring.

War erupted 10 months ago between federal Ethiopian troops and forces loyal to the Popular Front for the Liberation of Tigray, which controls Tigray, and spread to neighboring areas of Amhara and Afar in July. The fighting in these two regions has displaced hundreds of thousands of people and left an estimated 1.7 million people dependent on food aid.

“The escalating conflict in Tigray, which erupted in November 2020, threatens the government’s transformative reform agenda,” S&P said in its statement. (https://bit.ly/3CMPkvh)

Last week, the Ethiopian government requested a new extended credit facility from the International Monetary Fund to replace an expired component of an existing loan program.

Meanwhile, Ethiopia’s creditors committee held its first meeting on September 16 with the aim of restructuring its debts under the common G20 framework and helping to create stable economic fundamentals.

S&P expects the country’s domestic markets to play an increasingly dominant role in financing Ethiopia’s budget deficit compared to the agency’s forecast through 2024.

The agency maintained its negative outlook for Ethiopia, reflecting the potential inclusion of commercial creditors in debt restructuring plans and increasing pressures on the availability of external finance. (Reporting by Bhanvi Satija in Bangalore; Editing by Krishna Chandra Eluri)

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