Ethiopia Secures $3.4 Billion IMF Financing Agreement Amid Economic Reforms

Ethiopia and the International Monetary Fund (IMF) have reached an agreement for a new financing program worth $3.4 billion. This deal, announced by the IMF on Monday, aims to support Ethiopia's economic recovery and address financial challenges.

In a significant move to secure IMF support, Ethiopia's central bank floated the national currency, the birr, on Monday. This step is also crucial for advancing the country's long-overdue debt restructuring efforts. Ethiopia, which has been grappling with high inflation and persistent foreign currency shortages, became the third African nation to default on its debt in recent years, following similar defaults by other economies on the continent.

Negotiations between Ethiopia and the IMF began last year, aiming to establish a new lending program. The previous IMF-supported program, agreed upon in 2019, was abandoned due to the conflict in the northern Tigray region, which concluded with a peace deal in November 2022. Initial reports from Reuters indicated that Ethiopia was seeking approximately $3.5 billion in IMF financing.

The newly reached agreement will facilitate an immediate disbursement of around $1 billion to Ethiopia. As Africa's second-most populous country, Ethiopia's request for debt restructuring under the Group of 20's Common Framework process in early 2021 faced delays due to the two-year civil war in Tigray.

The Ethiopian government has recently implemented several economic reforms linked to the IMF negotiations. Earlier this month, the government adopted an interest rate-based monetary policy, demonstrating its commitment to economic stabilization and reform.

The new IMF financing agreement is expected to provide crucial support for Ethiopia as it navigates its economic challenges and seeks sustainable growth.