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The International Monetary Fund agreed to lend Ethiopia US$3,4 billion over four years as part of an economic reform programme, a key step to begin negotiations with creditors on restructuring the nation’s debt.
The decision will also allow the immediate disbursement of about US$1 billion, the fund said in a statement Monday announcing the loan.
The funds are part of about US$10,7 billion that the Horn of Africa nation expects from creditors via loans, grants and debt re-profiling. The IMF said in its statement the program will “catalyse additional external financing from development partners and provide a framework for the successful completion of the ongoing debt restructuring.”
Ethiopia has about US$28,4 billion of external debt and has been seeking to restructure its loans since 2021. Progress was delayed by a two-year civil war in the nation’s northern Tigray region that ended in November 2022. The country defaulted on a eurobond payment in December.
“This is a landmark moment for Ethiopia,” IMF Managing Director Kristalina Georgieva said in the statement.
Ethiopia’s central bank paved the way for an IMF deal when it announced on Monday that it would allow the nation’s currency — the birr — to trade freely.
The step echoed a similar measure by Egypt in March, when it allowed its currency to weaken almost 40 percent, enabling an US$8 billion bailout from the IMF.
Earlier this month, the country’s official creditors committee granted Ethiopia financing assurances to help fast-track approval of a new IMF loan.
Ethiopia is the fourth country to renegotiate its debt under a Group of 20-backed mechanism called the Common Framework, which seeks to coordinate talks between official, commercial and private creditors. – Bloomberg
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