NAIROBI, Kenya- Ethiopia has secured a substantial $3.4 billion from the International Monetary Fund (IMF) to support its ambitious economic reforms program.
This funding, approved under the four-year Extended Credit Facility (ECF), signifies Ethiopia’s commitment to transformative reforms and aims to stabilize and invigorate the nation’s economy.
Under the ECF, Ethiopia will receive an immediate disbursement of $1 billion to address its balance of payments needs and support the national budget.
Kristalina Georgieva, IMF Managing Director, lauded this development as a testament to Ethiopia’s dedication to reform.
“The approval of the ECF is a landmark moment for Ethiopia. The IMF looks forward to supporting efforts to make the economy more vibrant, stable, and inclusive,” she stated.
Central to these reforms is the Homegrown Economic Reform (HGER) Agenda, which focuses on easing exchange rate controls and transitioning to market-determined rates.
This move is crucial in addressing the foreign exchange shortage that has seen the Ethiopian birr depreciate by 30pc against the US dollar.
The country’s central bank has already removed restrictions on foreign exchange trading, marking a significant shift towards a more open market.
Ethiopia’s reform agenda also includes measures to tackle macroeconomic imbalances.
Antoinette Sayeh, IMF Deputy Managing Director, highlighted the importance of these steps: “The recent measures to decisively tackle macroeconomic imbalances, including moving to a market-determined exchange rate and modernizing the monetary policy framework, are critical steps forward.”
The government’s strategy to control high inflation involves modernizing the monetary policy framework, eliminating the monetary financing of the budget, and reducing financial repression.
These initiatives aim to create space for priority public spending and address debt vulnerabilities by mobilizing domestic revenues and securing timely debt restructuring agreements with external creditors.
The ECF is also expected to catalyze additional external financing from development partners. This support will provide a framework for successfully completing the ongoing debt restructuring and moving towards private-sector-led growth.
As Ethiopia strives to restore debt sustainability, the infusion of funds and structural reforms are anticipated to bolster investor confidence and economic resilience.
