Ethiopia has finalized an agreement with the International Monetary Fund (IMF) for a new financing program totalling $3.4 billion, the IMF announced on Monday.
This agreement follows Ethiopia’s decision to float its birr currency, a pivotal step toward obtaining IMF support and advancing long-awaited debt restructuring efforts.
The Horn-of-Africa nation, grappling with significant challenges such as high inflation and persistent foreign currency shortages, defaulted on its debt at the end of last year, becoming the third African economy in as many years to do so.
Talks with the IMF commenced last year to establish a new lending program, following the abandonment of the previous 2019 program due to conflict in the Tigray region, which concluded with a peace deal in November 2022.
The IMF disclosed that the agreement includes an immediate disbursement of approximately $1 billion. As reported by Reuters, Ethiopia had earlier sought around $3.5 billion in the negotiation process.
Ethiopia also initiated a debt restructuring process under the Group of 20’s Common Framework in early 2021, though the two-year civil war in Tigray hampered progress.
In tandem with these developments, the government in Addis Ababa has unveiled economic reforms, including adopting an interest rate-based monetary policy earlier this month.
Analysts view these reforms as intertwined with negotiations for the new IMF program, which aims to stabilize and revitalize Ethiopia’s economy.
