Ethiopia has secured an agreement with the International Monetary Fund (IMF) for a new financing program worth USD3.4 billion, the IMF said on Monday.
IMF Executive Board approved a four-year arrangement under the Extended Credit Facility (ECF) for Ethiopia in an amount of USD3.4 billion following Ethiopia’s announcement of a reformed macroeconomic program on Sunday, 28th of July 2024.
The IMF said the new funding will help the east African nation support implementation of its Homegrown Economic Reform (HGER) Agenda aimed at addressing macroeconomic imbalances and laying the foundations for private-sector led growth.
The Executive Board’s decision will enable an immediate disbursement USD1 billion, which will help Ethiopia, meet its balance of payments needs and provide support to the budget, IMF said.
IMF also indicated that Ethiopia’s economic program, supported by the four-year ECF arrangement, envisages a comprehensive policy package to stimulate private sector activity and increase economic openness to promote higher and more inclusive growth.
In a press release Monday IMF Managing Director Kristalina Georgieva, commended the move by the Ethiopian government. "This is a landmark moment for Ethiopia. The approval of the ECF is a testament to Ethiopia’s strong commitment to transformative reforms. The IMF looks forward to supporting these efforts to help make the economy more vibrant, stable, and inclusive for all Ethiopians."
The program is expected to help catalyze additional external financing from development partners and provide a framework for the successful completion of the ongoing debt restructuring.
Following the Executive Board discussion, Antoinette Sayeh, Deputy Managing Director, and Acting Chair, Ethiopia’s reform measures are aimed at addressing macroeconomic challenges including imbalances, restoring external debt sustainability, and implementing wide-ranging reforms to promote a robust, inclusive, and sustainable economy.
The Deputy Managing Director underlined that recent measures by Ethiopian authorities to decisively tackle macroeconomic imbalances, including moving to a market-determined exchange rate, removing current account restrictions, and modernizing the monetary policy framework to control inflation, are critical steps forward.
“Supportive macroeconomic policies, including the elimination of monetary financing of government deficits, monetary policy tightening, and prudent fiscal management, will need to be sustained to keep inflation in check, ensure a successful implementation of the market-determined exchange rate, and durably address exchange rate shortages,” she added.