Ethiopia has moved closer to resolving its sovereign debt default after its official creditors approved a preliminary agreement between the government and private bondholders to restructure the country’s $1 billion Eurobond, the Ethiopian Finance Ministry said Friday.

The approval by Ethiopia’s Official Creditor Committee marks an important step towards completing the restructuring of the bond, which was due in 2024. The East African country had reached an agreement in principle with bondholders in June after several previous attempts to restructure the debt failed.

The Official Creditor Committee, co-chaired by France and China, said the agreement in principle currently complies with the principle of comparable treatment of creditors and the terms of the memorandum of understanding previously reached with Ethiopia. The Finance Ministry said the government can now proceed with implementing the draft agreement with bondholders.

However, official creditors raised concerns over a “New Money Warrant” included in the bondholder agreement, warning that it could potentially give private investors more favorable treatment than bilateral creditors. The warrant would give bondholders the option to invest in a future Ethiopian bond of up to $1 billion at a market-linked interest rate.

Under the proposed arrangement, Ethiopia would also have the option of settling the warrant in cash, with the payment capped at $90 million. The creditor committee said it would closely monitor implementation and could reconsider the comparability of treatment if the instrument ultimately provides excessive benefits to bondholders.

Ethiopia and its bilateral creditors finalized a separate agreement last year to restructure the country’s external debt. The government had opted into the G20 Common Framework in 2021.