The Horn-of-Africa nation, which is struggling with high inflation and chronic foreign currency shortages, became the third economy on the continent in as many years to default on its debt at the end of last year.
A general view of the cityscape of Addis Ababa, Ethiopia, April 24, 2024.- Reuters
Ethiopia has secured a $3.4 billion financing program with the International Monetary Fund (IMF), marking a significant step towards economic stabilisation. On the same day, Ethiopia’s central bank floated the birr currency, a critical move to get IMF support and progress on debt restructuring.
This development comes as the Horn-of-Africa nation grapples with high inflation and persistent foreign currency shortages. Ethiopia became the third African economy in recent years to default on its debt at the end of last year.
It has been in talks with the IMF since last year to establish a new lending program, after the last fund-supported program agreed in 2019 was abandoned due to conflict in the northern region of Tigray that ended with a November 2022 peace deal.
The IMF said the agreement will help it for an immediate disbursement of about $1 billion. Ethiopia, Africa’s second-most populous country, requested a debt restructuring under the Group of 20’s Common Framework process in early 2021. However, progress was hampered by the two-year civil war in Tigray.
The government in Addis Ababa has unveiled some economic reforms, which analysts say are linked to the negotiations for a new IMF program, including the adoption of an interest rate-based monetary policy earlier this month.
With inputs from agencies.
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