IMF and Ethiopian Government Reach Agreement on $3.4 Billion Financing Program
The International Monetary Fund (IMF) and the Ethiopian government have reached an agreement on the second review of the country's $3.4 billion financing program. The East African nation secured this program last July, just hours after implementing the IMF's key recommendations. Following this positive review, Ethiopia will gain access to a disbursement of approximately $251 million.
The economic reform program approved by Addis Ababa, which includes the transition to a market-determined exchange rate, is progressing satisfactorily, according to the multilateral financial institution's statement. Macroeconomic stability is supported by prudent policies, which have allowed for a moderate impact of the new exchange rate system on inflation to be observed. Furthermore, indicators of future economic growth appear promising.
The first review of the program, which focused on aspects such as foreign exchange reserves and external debt, was agreed upon with the services in September and approved by the board last month. After this exceptional pace of reviews, the IMF will move to a six-month review schedule.
Ethiopia has successfully emerged from the crisis following its 2023 debt default. As a reminder, the country had voluntarily chosen not to pay $33 million in interest on an international sovereign bond, not due to liquidity issues, but rather to treat all creditors equally. It sought to renegotiate its debt under the G20's common framework and succeeded. Sometimes, it takes audacity to manage budget deficits.
