Ethiopia has secured a new $3.4 billion financing deal with the International Monetary Fund (IMF), setting the stage for the completion of its long-delayed debt restructuring within the next three to six months. This announcement was made by a senior finance ministry official on Tuesday.
The four-year IMF program, announced on Monday, follows Ethiopia’s decision to float its currency, the birr, a key recommendation from the IMF. “Debt restructuring should be finalised before the next IMF programme review,” said State Minister of Finance Eyob Tekalign, indicating a timeline of three to six months.
The IMF deal is anticipated to attract additional financing of up to $7.3 billion from the World Bank and other creditors, according to Ethiopian officials. The World Bank’s board was scheduled to meet later on Tuesday to approve its portion of the additional funds, Eyob confirmed.
News of the IMF agreement boosted Ethiopia’s $1 billion government bond, central to the restructuring plan, to its highest level since October 2021. The bond saw an increase of more than 2 cents, trading at nearly 78 cents on the dollar, reflecting a slight over 20% discount of its original face value.
In the foreign exchange market, leading commercial banks quoted the Ethiopian birr at 74.74 against the dollar, unchanged from its position after Monday’s float announcement, which had caused a 30% drop against the dollar.
While Ethiopia’s development partners have praised the move to a market-based foreign exchange rate, some analysts have raised concerns that it could increase inflation and living costs, particularly affecting the poorest populations.
Ethiopia continues to face significant challenges, including the effects of climate change and the reconstruction of the northern Tigray region, which was devastated by a two-year civil war that concluded in late 2022.
Source: CNBC
