Ethiopia secures a $3.4 billion deal with the IMF, facilitating the long-awaited debt restructuring within the next 3-6 months. Further financing from the World Bank and other creditors is anticipated.
Bollywood Fever: Ethiopia has secured a significant $3.4 billion financing deal with the International Monetary Fund (IMF), a move that is expected to enable the completion of the country’s long-delayed debt restructuring within the next three to six months. This announcement was made by State Minister of Finance Eyob Tekalign on Tuesday.
The four-year, $3.4 billion program was confirmed on Monday, shortly after Ethiopia undertook a critical IMF recommendation to float its currency, the birr. “Debt restructuring should be finalized before the next IMF program review,” Eyob told Reuters, indicating that this process should be completed in approximately three to six months.
Ethiopian officials have stated that the IMF deal will likely be followed by additional financing of up to $7.3 billion from the World Bank and other creditors. Eyob mentioned that the World Bank’s board was scheduled to meet later on Tuesday to approve its share of the extra funds.
News of the IMF agreement positively impacted Ethiopia’s $1 billion government bond, which is central to the restructuring plan. The bond reached its highest level since October 2021, with a more than 2-cent increase, trading at nearly 78 cents on the dollar, representing just over a 20% discount of its original face value.
In the foreign exchange market, major commercial banks quoted the Ethiopian birr at 74.74 against the dollar, unchanged from its position following Monday’s float announcement, which had caused a 30% drop against the dollar.
While Ethiopia’s development partners have lauded the move towards a market-based foreign exchange rate, some analysts caution that it could lead to increased inflation and a higher cost of living, particularly for the poorest segments of the population.
Ethiopia faces additional challenges, including the impacts of climate change and the reconstruction of its northern Tigray region, which was severely affected by a two-year civil war that concluded in late 2022.
The new IMF deal and subsequent financial support are seen as critical steps in stabilizing Ethiopia’s economy and addressing its pressing economic challenges.
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