Imf Approves 248 Million For Ethiopia

IMF Disburses $248 Million to Ethiopia Under $3.4 Billion Extended Credit Facility

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Boosting Economic Reform and Financial Stability

Addis Ababa, January 18, 2025 (ENA) — In a major step toward stabilizing Ethiopia’s economy and supporting ongoing reforms, the International Monetary Fund (IMF) has approved a $248 million disbursement under Ethiopia’s 48-month Extended Credit Facility (ECF). This latest funding brings total disbursements to $1.611 billion out of the $3.4 billion package that the IMF approved in July 2024.

Ethiopia’s ECF program is a critical pillar of the country’s Homegrown Economic Reform Agenda (HGER), aimed at addressing macroeconomic imbalances, modernizing financial policies, restoring debt sustainability, and driving private-sector-led growth. The IMF has praised the Ethiopian government for making notable progress in implementing these reforms despite significant economic challenges.

Foreign Exchange Market and Monetary Policy Reforms

One of the most significant developments in Ethiopia’s economic transformation is the ongoing reform of the foreign exchange market. The National Bank of Ethiopia (NBE) has taken major steps to increase FX supply and improve market efficiency, leading to a narrowing of the parallel market premium to single digits—a crucial milestone in stabilizing the currency.

Nigel Clarke, IMF Deputy Managing Director and Chairman of the Board, commended Ethiopia’s shift toward a flexible exchange rate system, highlighting how strong macroeconomic and foreign exchange policy measures have strengthened the country’s financial outlook.

Key Monetary and Exchange Rate Policy Achievements:

  • Tighter monetary and financial conditions have helped contain inflation and stabilize the economy.
  • NBE has limited its interventions in the FX market, allowing market-driven rates to improve liquidity and efficiency.
  • A modernized monetary policy framework is being introduced to enhance governance and economic resilience.

The IMF emphasized that curbing the monetary financing of government deficits is essential for achieving long-term macroeconomic stability. The Ethiopian government must continue refining foreign exchange policies to ensure lasting improvements in currency management.

Strengthening Fiscal Revenues and Restructuring State-Owned Enterprises

Ethiopia’s economic resilience depends heavily on enhancing domestic revenue collection and improving the efficiency of state-owned enterprises (SOEs). The government has taken substantial steps to boost fiscal revenues and reduce reliance on external borrowing, including:

  • Expanding tax administration and enforcement to increase domestic revenue.
  • Enhancing governance of SOEs to mitigate financial risks and improve public sector performance.
  • Strengthening financial oversight in the banking system to ensure credit allocation efficiency.

While progress has been promising, the IMF urged sustained commitment to fiscal discipline and transparency. Ensuring social safety nets remain intact is also crucial to protecting vulnerable communities from the potential hardships of economic adjustments.

Debt Sustainability and Progress in Restructuring

Ethiopia has been actively working to restore debt sustainability, engaging in negotiations with international creditors under the G20 Common Framework. The IMF noted significant progress in securing debt treatment agreements, which are essential for reducing Ethiopia’s external debt burden.

Key Updates on Ethiopia’s Debt Management:

  • Financing assurances received from creditors align with IMF program requirements.
  • An agreement with the Official Creditor Committee is close to finalization, marking a major step toward fiscal sustainability.
  • Ethiopia is negotiating a Memorandum of Understanding (MoU) with creditors ahead of the next IMF review.

Additionally, discussions are ongoing with Eurobond holders and private commercial creditors to ensure comparable treatment and a balanced resolution of Ethiopia’s external debt obligations.

IMF’s Outlook: Ethiopia on the Right Track, But Challenges Remain

Following the Executive Board’s review, Nigel Clarke highlighted Ethiopia’s steady progress in economic reform implementation. However, he stressed that continued commitment to sound macroeconomic policies will be critical to sustaining stability and growth.

IMF Recommendations for Ethiopia’s Economic Stability:

  • Maintain tight monetary policies to curb inflation and support economic stabilization.
  • Ensure financial market reforms continue, especially in strengthening the foreign exchange system.
  • Accelerate structural reforms to boost economic growth and increase private-sector investment.
  • Close governance gaps in NBE’s new legal framework to enhance its autonomy and efficiency.

While Ethiopia’s Homegrown Economic Reform Agenda has made substantial progress, the road ahead requires sustained focus on economic stabilization, financial sector resilience, and social protections for vulnerable communities.

Conclusion: Ethiopia’s Economic Transformation Gains Momentum

Ethiopia’s engagement with the IMF Extended Credit Facility is a testament to the country’s commitment to tackling economic challenges and restoring fiscal health. The latest $248 million disbursement provides essential financial support to stabilize Ethiopia’s balance of payments and reinforce its ambitious reform agenda.

Key Takeaways from the IMF’s Review:

  • Progress in exchange rate reforms and foreign currency market stability is strengthening Ethiopia’s financial position.
  • Efforts to boost fiscal revenue collection and restructure state-owned enterprises are yielding positive results.
  • Debt restructuring negotiations are advancing, improving Ethiopia’s long-term financial sustainability.
  • Continued policy discipline and strong governance are crucial to ensuring lasting economic stability.

Ethiopia’s Homegrown Economic Reform Agenda remains at the center of its policy framework, positioning the country for sustainable growth, increased investor confidence, and financial stability in the years ahead. While challenges persist, the momentum gained through IMF-backed reforms sets Ethiopia on a path toward a stronger and more resilient economy.