IMF Approves 248 million USD Disbursements for Ethiopia Under 3.4 billion USD ECF Arrangement

Addis Ababa, January 18, 2025 (ENA) — The Executive Board of the International Monetary Fund (IMF) completed today the second review of the 48-month Extended Credit Facility (ECF) for Ethiopia.

The Board’s decision allows for an immediate disbursement of about 248 million USD which will help Ethiopia meet its balance of payments needs.

The completion of the review brings total disbursements under the arrangement to about 1.611 billion USD.

Ethiopia’s ECF arrangement for a total of about 3.4 billion USD at the time of program approval on July 29, 2024 is aimed at supporting the authorities’ Homegrown Economic Reform Agenda (HGER) to address macroeconomic imbalances and lay the foundations for private sector led growth.

Foreign exchange market functioning has continued to improve with the authorities taking significant policy actions to strengthen market efficiency.

According to a press release issued by IMF, the National Bank of Ethiopia (NBE)has maintained tight monetary and financial conditions, and modernization of the monetary policy framework is advancing.

Progress in raising domestic fiscal revenues, strengthening state-owned enterprises, and anchoring financial stability is promising, with continued commitment needed to sustain the achievements thus far. Expanding social safety nets is critical to mitigating the impact of reforms on vulnerable people.

The authorities continue their efforts to restore debt sustainability and are taking steps to secure a debt treatment, IMF stated.  

The progress made on debt restructuring negotiations under the Common Framework is welcome. The financing assurances received, and adjustment efforts made are consistent with IMF policy requirements and program parameters.

Following the Executive Board discussion, Nigel Clarke, Deputy Managing Director, and Chairman of the Board, said in a statement that the authorities continue to make strong progress in implementing their Fund-supported program and addressing macroeconomic imbalances.

Clarke stated the transition to a flexible exchange rate has advanced further, supported by macroeconomic and foreign exchange market policy measures, and the parallel market premium has stabilized in single digits with rising FX supply.

“Continuing to restrict NBE’s FX interventions and additional policy measures to support FX market development will be critical to enhance market efficiency and deepening. Prudent macroeconomic policies, including continued tight monetary policy and avoiding monetary financing of government deficits are essential to reducing imbalances and ensuring macroeconomic stability.”

The new law governing the NBE represents a significant advance on the existing legal framework in most respects. However, closing the remaining gaps with respect to governance and autonomy is important, Clarke remarked.  

 “The substantial progress made towards reaching an agreement on a debt treatment with the Official Creditor Committee under the G20 Common Framework is an important step towards restoring debt sustainability. The authorities are working on having an agreed Memorandum of Understanding by the time of third review, while also making progress on a comparable treatment with Eurobond holders and other external commercial creditors.”