The International Monetary Fund (IMF) has greenlit a $3.4 billion funding program for Ethiopia over the course of four years, marking a significant milestone in the nation’s quest to restructure its debt and revive its economy. The decision, announced on Monday, includes an initial disbursement of approximately $1 billion.
Ethiopia, grappling with an external debt totaling $28.4 billion, has been navigating economic challenges exacerbated by a civil conflict in the Tigray region and a eurobond default last December. The IMF’s approval is expected to catalyze additional financing from development partners and provide a framework for ongoing debt restructuring efforts.
“This is a landmark moment for Ethiopia,” said IMF Managing Director Kristalina Georgieva, underscoring the country’s commitment to transformative reforms. The move follows Ethiopia’s decision to allow its currency, the birr, to float freely—a pivotal step endorsed by the country’s central bank on Monday.
The IMF program aims to address macroeconomic imbalances, restore external debt sustainability, and foster inclusive growth driven by the private sector. Under Prime Minister Abiy Ahmed’s administration, Ethiopia has initiated sweeping economic reforms, including liberalizing sectors such as banking and establishing a capital market.
Ethiopia becomes the fourth country to renegotiate its debt under the Group of 20-backed Common Framework, aimed at coordinating discussions among official, commercial, and private creditors. The IMF forecasts Ethiopia’s real GDP to grow by 6.5% in the current fiscal year, with inflation decreasing from 30% to approximately 10% over the coming years. Additionally, external debt-to-GDP ratio is projected to decline from 28% to around 23%.
The approval of the IMF program is poised to bolster Ethiopia’s economic prospects and marks a crucial step towards stabilizing its financial footing amidst ongoing global economic uncertainties.
