A general view of the cityscape of Addis Ababa, Ethiopia, December 19, 2025. Image@ REUTERS/Tiksa Negeri//File Photo
Ethiopia’s stalled debt standoff with private bondholders has become the flashpoint at the centre of a broader push to overhaul the G20’s Common Framework for sovereign debt restructuring, as creditor nations gathered in Paris on Wednesday to confront the mechanism’s deepening shortcomings.
The Paris Club, the group of wealthy creditor nations that anchors international debt negotiations, used its 2025 annual report, released at the opening of its annual forum, to call for structural changes to the framework, which was established by the G20 in 2020 to bring order to sovereign debt crises in low-income countries. The forum, themed around improving debt crisis prevention and resolution, drew representatives from borrowing countries, multilateral institutions, private sector organisations and academics to examine the framework’s limitations and chart a path forward.
Despite signs that the overall debt distress picture is improving, for the first time since 2017, more than half of low-income countries, 52%, sit at low or moderate risk of debt distress, officials converged on a sharper concern: that the machinery of restructuring itself remains too slow, too fragmented and too easily exploited.
“The Common Framework must deliver faster and swiftly embark all creditors in delivering comparable efforts,” Paris Club Co-Chair Thomas Revial wrote in the report. Revial also floated the idea of allowing debtor countries to share details of official creditor debt treatments with other creditors, without being bound by non-disclosure agreements, as one way of accelerating the process. “The Common Framework should eventually become the standard framework for sovereign debt restructurings beyond low-income countries,” he added.
The record on delivery is mixed. Ghana, Zambia and Chad have broadly completed restructurings under the framework. But Zambia has not yet fully put its debt to rest six years after the process began, well beyond the one-year window bilateral deals are supposed to close within after a preliminary agreement is reached. Ethiopia presents a starker case still. Official creditors, including China and France, reached a preliminary agreement to restructure $8.4 billion of bilateral debt in March 2025, but the process has since stalled over a standoff with private bondholders holding a $1 billion defaulted Eurobond. Those creditors were told their initial proposal fell short under the principle of “comparability of treatment,” a rule requiring private lenders to absorb losses broadly in line with official creditors. Bondholders have contested that framing, arguing that Ethiopia’s improved economic outlook does not justify the scale of losses being demanded, and have threatened legal action.
Ethiopia’s finance ministry laid the blame squarely on structural flaws in the framework’s sequencing. “The CF’s implicit sequencing means that by the time a debtor engages bondholders, the analytical divergence between the IMF and private creditors has not been addressed,” wrote Astewaye Woldemichael, a senior adviser at the ministry. “The IMF and OCC need to engage private creditors earlier. Leaving the debtor to bridge this gap is a design flaw.”
Beijing weighed in on the bondholder dispute with pointed language. Xuan Changneng, Deputy Governor of the People’s Bank of China, Ethiopia’s largest bilateral creditor, stopped short of naming Addis Ababa’s bondholders directly, but made clear that creditor nations “should spare no efforts to strictly enforce the principle of Comparability of Treatment.” He went further, calling for coordinated legal and technical action to “curb malicious litigation by bond investors, thereby safeguarding the foundation and credibility of the Common Framework.”
The bondholder threat has rattled much of the debt restructuring community. Many legal advisers and even some within the bondholder camp view the litigation threat as an assault on the framework itself, one that, if pursued, could make comprehensive debt deals harder to assemble in future cases.
A separate but related dispute over Preferred Creditor Status also featured prominently. The status, which informally shields creditors such as the IMF and World Bank from losses, has become contested ground as development finance institutions multiply their claims to the same protection. Changneng and Sonja Gibbs, managing director of the Institute of International Finance, both called for clear eligibility rules. “The lack of clear rules on which institutions qualify for the PCS not only slowed down the pace of restructuring, but also raised concerns over fair burden sharing,” Changneng wrote, noting that roughly 100 development finance institutions globally are now asserting the status. The issue surfaced in both the Ghana and Zambia cases, where Afreximbank was pressured to take losses despite claiming the protection.
The Common Framework was set up under the Saudi Arabian G20 presidency and endorsed by the Paris Club, with the aim of delivering orderly and coordinated restructurings for low-income countries through a single official creditor committee drawing together G20, Paris Club and other bilateral lenders. Five years on, all parties appear to agree that the architecture, while necessary, is in need of a substantial rebuild.
By: Andrews Kwesi Yeboah