The International Monetary Fund (IMF) has laid out a series of critical deadlines and stringent preconditions that Ethiopia must meet to access funds under the Extended Credit Facility (ECF). This comes at a crucial time when the Ethiopian economy is navigating complex challenges, including a liquidity crisis and the need for structural reforms.
Continuous Conditionality for Fund Release
One of the central aspects of the IMF’s conditions is the implementation of continuous conditionality measures. These include:
- Non-Imposition of Restrictions: Ethiopia must refrain from imposing or intensifying restrictions on the making of payments and transfers for current international transactions. This is crucial for maintaining the free flow of international trade and investment.
- Currency Practices: The introduction or modification of multiple currency practices is prohibited. This ensures the Ethiopian Birr operates under a unified and transparent currency system.
- Bilateral Payments Agreements: Ethiopia is prohibited from entering into bilateral payments agreements that contravene Article VIII of the IMF’s Articles of Agreement. This condition seeks to ensure Ethiopia’s compliance with international financial standards.
- Import Restrictions: Ethiopia must avoid imposing or intensifying import restrictions for reasons related to balance of payments. This is intended to prevent any disruptions in the import of essential goods and services.
Legal Amendments and Governance Overhaul
In addition to continuous conditionality, the IMF has set specific deadlines for Ethiopia to undertake significant legal and institutional reforms. By End-December 2024, the National Bank of Ethiopia (NBE) is required to submit comprehensive draft legal amendments to the NBE Proclamation to the Ethiopian Parliament. These amendments, which must be prepared in consultation with IMF staff, are aimed at:
- Updating and modernizing the governance of the NBE.
- Enhancing the decision-making structure of the NBE with internal checks and balances.
- Improving accountability, transparency, and autonomy within the NBE.
Phasing of IMF Disbursements
The disbursement of funds under the ECF is intricately linked to Ethiopia’s compliance with these preconditions. The IMF has proposed a phased approach to access, with specific amounts allocated for release upon successful completion of review checkpoints. Key dates include:
- September 10, 2024: USD 255.60 million is scheduled for disbursement following the observance of continuous performance criteria (PCs) and completion of the first review.
- December 10, 2024: Another USD 191.70 million will be released upon meeting the PCs for September 2024 and the second review.
- Further disbursements are scheduled through April 15, 2028, contingent on Ethiopia’s ongoing adherence to the specified performance criteria and completion of subsequent reviews.
A Strategic Imperative for Economic Stability
These measures underscore the IMF’s strategic imperative to drive Ethiopia towards economic stability and sustainable growth. The onus is now on the Ethiopian government to implement the necessary reforms and maintain compliance with the IMF’s stringent conditions. Failure to meet these deadlines could result in the withholding of critical financial support, which could exacerbate the country’s economic challenges.
As Ethiopia moves towards these pivotal dates, the international community will be closely monitoring the country’s progress. The successful implementation of these reforms could pave the way for a more resilient and robust Ethiopian economy in the years ahead.
