Ethiopia has secured a new $3.4 billion financing program from the International Monetary Fund (IMF), the organization announced in a statement. As part of this agreement, Ethiopia’s central bank has floated the country’s birr currency, a critical step to secure IMF support and make progress on a long-delayed debt restructuring process.
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Ethiopia, which has been struggling with high inflation and chronic foreign currency shortages, became the third African economy in recent years to default on its debt at the end of 2022. The country has been in negotiations with the IMF since last year to establish a new lending program, after the previous IMF-supported program agreed in 2019 was abandoned due to the conflict in the northern Tigray region, which ended with a peace deal in November 2022.
The new IMF agreement will enable an immediate disbursement of around $1 billion to Ethiopia. This comes after Ethiopia requested a debt restructuring under the G20’s Common Framework process in early 2021, but progress was slowed by the two-year civil war in Tigray.
Moreover, analysts say the economic reforms recently unveiled by the Ethiopian government, including the adoption of an interest rate-based monetary policy, are linked to the negotiations for this new IMF program. The Horn of Africa nation is the second-most populous country in Africa.
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