The International Monetary Fund (IMF) has approved a significant bailout package of $3.4 billion for Ethiopia to support its economic reforms over the next four years. This comes as the Horn of Africa nation grapples with chronic foreign currency shortages and high inflation, largely attributed to the aftermath of the brutal civil war in Tigray.
“This is a landmark moment for Ethiopia,” stated Kristalina Georgieva, the IMF’s managing director, emphasizing the country’s strong commitment to transformative reform. The news of the deal follows Ethiopia’s decision to float its currency, a crucial step in securing the loan. As a result, the Ethiopian birr lost nearly a third of its value against the dollar.
The IMF announced that it would immediately release about $1 billion to address Ethiopia’s balance of payments needs and provide support to the budget. Ethiopia, Africa’s second most populous country, has also been in discussions with international creditors to restructure its debt after defaulting on its sovereign bond in December.
Following the end of the Tigray conflict, other conflicts in regions like Oromia and Amhara have further strained the economy. The new IMF-supported economic program aims to stimulate private-sector led growth, allowing for increased spending on crucial areas such as health, education, investment, and social safety nets.
Expanding coverage and support for vulnerable households is a key focus of the government’s reform agenda. The IMF expressed its commitment to supporting these efforts to create a more vibrant, stable, and inclusive economy for all Ethiopians. Additionally, the program is expected to attract additional external financing from development partners and facilitate the successful completion of ongoing debt restructuring.
Addis Ababa has been actively seeking over $10 billion in support from international financial institutions like the IMF and the World Bank. The approval of this bailout marks a significant step towards stabilizing Ethiopia’s economy and fostering sustainable growth in the region.
