The International Monetary Fund (IMF) is on the receiving end after it published a report indicating Ethiopia is facing liquidity issue.
On Monday, Ethiopia’s bondholders faulted the multilateral lender for reporting on the solvency issue, terming it a “significant flaw” and that the report could throw investors into giving the country some debt relief.
What this means, according to a CNBC report is that Ethiopia might need more time to pay, or a solvency issue, which could debt writedowns know as haircuts.
“The Committee disagrees with the conclusions reached by the IMF in the staff report,” it said in a statement, adding that the IMF analysis “incorporates export projections and reserve adequacy targets that do not align with the Committee’s assessment of Ethiopia’s economic fundamentals”.
It said it had issued a paper detailing “significant flaws in the recently published IMF staff report… which it believes are artificially creating a solvency issue for Ethiopia”.
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Neither the IMF nor the Ethiopian government immediately responded to requests for comment.
Ethiopia’s government has said bondholder losses are unavoidable, and last year proposed an 18% haircut.
The committee letter said the IMF’s latest staff report “fails to acknowledge significant improvements in Ethiopia’s macroeconomic situation,” and that it had significantly undervalued increases in key exports, including gold and coffee.
The committee, which represents investors who account for more than 40% of the holdings of Ethiopia’s $1 billion bond, said it reserved the right to take action, including potential proceedings in English courts, to enforce Ethiopia’s obligations to repay the outstanding debt.
