NAIROBI, Feb 17 (Reuters) – Investors holding Ethiopia’s defaulted bond said on Monday there are “significant flaws” in the latest International Monetary Fund report that suggests the country is facing a solvency issue, a scenario that would require them to grant debt relief.

The salvo is the latest battle between the creditor committee, the IMF and Ethiopia over whether the country is facing a liquidity issue, meaning it might only need more time to pay, or a solvency issue, which could require debt writedowns known 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”.

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.

(Reporting by Duncan Miriri; Editing by Libby George and Helen Popper)