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UPDATE 1-Moody's downgrade over G20 common framework hits Ethiopian bonds

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LONDON, May 18 (Reuters) - Ethiopian sovereign dollar-bonds dropped on Tuesday after Moody's slashed the country's rating to Caa1, citing a rising risk that private creditors were in line for losses as the country pushes to overhaul its debt burden.

Ethiopia announced in January it would seek debt relief under the new Group of 20 (G20) common framework designed to help governments to overhaul the debt they owe to official and commercial creditors after the COVID-19 crisis sent the burdens of many developing countries spiralling.

Chad and Zambia have also applied for debt overhauls under the framework which was launched six months ago, though progress has been slow.

"The passage of time since Ethiopia's application to the Common Framework suggests a relatively complex decision by the Common Framework's creditor committee, which in turn indicates that an outcome that does not impose any losses on private sector creditors is less likely," Moody's said late on Monday.

The ratings agency also kept Ethiopia's rating on review for a further downgrade.

The news pushed its 2024 bond 1.3 cents lower to trade at 94.67 cents in the dollar - its biggest daily loss since early February, Tradeweb data showed.

Simon Quijano-Evans, chief economist at Gemcorp Capital, said pushing Sub-Sahara African countries to go down the route of the G20 common framework put their access to much-needed private capital at risk.

"Ethiopia is a clear case in point, with Moody’s now cutting the country’s rating to Caa1, as everyone waits for months for a DSA (debt sustainability assessment) and frankly any clarity on what exactly the Common Framework means," said Quijano-Evans.

Ethiopia has already suffered ratings downgrades from Fitch and S&P Global Ratings since signing up to the framework.

Moody's also said heightened domestic political tensions added to the risk to official sector support and undermined foreign investment critical for the government's financing in the near and medium term.

On Saturday, the country's electoral body said it had postponed parliamentary elections due on June 5, although it said it did not foresee a delay of more than three weeks.

Meanwhile French President Emmanuel Macron is hosting African leaders and the heads of multilateral lenders in Paris on Tuesday to find ways of financing African economies hurt by the COVID-19 pandemic and to discuss handling the continent's billions of dollars of debt.

(Reporting by Karin Strohecker; Editing by Tom Arnold and Susan Fenton)