IMF Approves $3.4bn Landmark Bailout for Ethiopia.
By Caroline Ameh
The International Monetary Fund (IMF), Tuesday (30th July) approved a $3.4 billion (£2.6 billion) bailout for Ethiopia, aimed at supporting the nation’s economic reforms over the next four years.
This decision comes as Ethiopia grapples with chronic foreign currency shortages and high inflation, largely attributed to the devastating two-year civil war in Tigray that concluded in 2022.
“This is a landmark moment for Ethiopia,” remarked Kristalina Georgieva, the IMF’s Managing Director. She emphasized that the approval is “a testament to Ethiopia’s strong commitment to transformative reform.”
The announcement followed Ethiopia’s decision to float its currency, a move analysts believe was crucial for securing the loan. Consequently, Ethiopia’s currency, the birr, depreciated by nearly a third against the dollar on Monday.
The IMF stated it would immediately disburse approximately $1 billion to address Ethiopia’s balance of payments needs and provide budgetary support.
Ethiopia, the second most populous country in Africa, has been negotiating with international creditors to restructure its debt. In December, it became the third African country in three years to default on its sovereign bond.
Despite the end of the war in Tigray, ongoing conflicts in Oromia and Amhara have continued to strain Ethiopia’s economy. The new IMF-supported economic program aims to foster private-sector-led growth, which the IMF believes will enable increased spending on health, education, investment, and social safety nets.
Expanding coverage and enhancing support to the most vulnerable households are central to the government’s reform agenda, according to the IMF. “The IMF looks forward to supporting these efforts to help make the economy more vibrant, stable, and inclusive for all Ethiopians,” stated Ms. Georgieva.
The IMF also anticipates that this program will help attract additional external financing from development partners and provide a framework for the successful completion of the ongoing debt restructuring.
Addis Ababa has been actively seeking more than $10 billion in support from international financial institutions, including the IMF and the World Bank.
