Addis Ababa – The International Monetary Fund (IMF) Executive Board is set to meet on Friday, January 17, 2025, to evaluate Ethiopia’s progress under its $3.4 billion Extended Credit Facility (ECF) program. If approved, the second review could unlock over $250 million in funding, providing a significant boost to Ethiopia’s ongoing economic reform efforts.
This review follows a staff-level agreement reached on November 27, 2024, after an IMF mission visited Addis Ababa from November 12 to 26 to assess the country’s progress. The IMF noted that Ethiopia had made substantial advancements in implementing its “homegrown economic reform program.” This includes transitioning to a market-determined exchange rate and addressing structural issues that have long hindered the nation’s economic growth.
While the agreement does not explicitly reference an understanding between the Ethiopian government and its official creditors on debt restructuring, the IMF highlighted that “key milestones have been achieved under the Common Framework process.” According to an anonymous source cited by Bloomberg, significant progress on debt reworking has yet to be officially finalized. However, the IMF staff determined there was enough progress to recommend the Executive Board approve the second review.
Debt Restructuring Under the G20 Common Framework
Ethiopia is restructuring its $12.4 billion external debt under the Group of 20’s Common Framework, an initiative designed to provide comprehensive debt solutions for countries facing economic challenges. The creditor committee overseeing Ethiopia’s restructuring efforts is co-chaired by China and France and includes other creditor nations such as Israel, Japan, and India. The resolution of Ethiopia’s debt challenges is considered critical to restoring the country’s fiscal sustainability and securing future growth.
Reform Milestones and Economic Progress
Ethiopia’s economic reform program, launched in July 2024, has introduced sweeping changes to modernize the country’s economic framework. A key component of these reforms is the shift from a crawling peg exchange rate system to a market-based currency regime. This change has already yielded results, with foreign exchange shortages easing and the gap between official and parallel market exchange rates narrowing to less than 10%, according to the IMF.
These reforms have also unlocked additional external financing. Central Bank Governor Mamo Mihretu announced in an online statement that Ethiopia is expected to secure $10.7 billion in external financing from the IMF, World Bank, and other creditors as part of the reform agenda. This financial inflow is essential for sustaining Ethiopia’s efforts to stabilize its economy and invest in key sectors.
Previous Milestones and First Review
This latest development follows the successful completion of the first review of Ethiopia’s four-year ECF program. On October 18, 2024, the IMF Executive Board approved the first review, allowing the disbursement of $340.7 million. The program’s overall goal is to support Ethiopia’s macroeconomic stability, advance structural reforms, and promote inclusive growth.
Broader Implications
The IMF’s $3.4 billion loan program represents a critical element of Ethiopia’s broader reform agenda, which aims to address longstanding economic challenges, including high inflation, limited foreign exchange reserves, and external debt burdens. Successful implementation of these reforms could strengthen Ethiopia’s economic resilience, attract foreign investment, and lay the groundwork for sustained growth.
As Ethiopia works to rebuild its economy amid regional and global challenges, the upcoming IMF Executive Board decision will be a crucial step in determining whether the country stays on track to achieve its ambitious reform goals. Approval of the review would not only release $250 million in funding but also signal confidence in Ethiopia’s reform trajectory, potentially encouraging further support from international partners.
