It is therefore clear that the risk has risen that private sector creditors will incur losses, although it remains unclear how far that risk has risen. Ethiopia will be required to engage with private creditors, but the decision on whether to enforce comparability of treatment will ultimately rest with official sector lenders. The Paris Club has indicated that exceptions could in principle be made. However, they will only be allowed under limited circumstances, specifically “when the debt only represents a small proportion of the country’s debt burden and when restructuring would unduly interfere with the smooth running of trade”. The former is certainly true in Ethiopia’s case, which was an important factor behind Moody’s decision not to move the rating down at this time. However, it is not clear how far that will influence the outcome of what official sector creditors are likely to see as an example case.

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