IMF approves Ethiopia $3.4bn bailout

 

The International Monetary Fund (IMF) has granted a $3.4 billion (£2.6 billion) bailout for Ethiopia to help it implement economic reforms over the next four years.

 

The Horn of Africa nation has been battling with chronic foreign currency shortages and rising inflation, which have been mostly blamed on Tigray's violent two-year civil war, which concluded in 2022.

 

"This is a landmark moment for Ethiopia," said Kristalina Georgieva, the IMF's managing director, adding that it was "a testament to Ethiopia's strong commitment to transformative reform".

 

The agreement was announced shortly after Ethiopia floated its currency, which many believe was a critical step toward securing the loan.

 

Following Monday's news, Ethiopia's currency, the birr, lost about a third of its value against the dollar.

 

The IMF announced that it would immediately provide approximately $1 billion to assist Ethiopia with its "balance of payments needs and budget support."

 

Ethiopia, Africa's second most populous country, has also been in talks with international creditors to restructure its debt.

In December, it became the third African country in three years to default on its sovereign debt.

 

Following the conclusion of the war in Tigray's northern area, new conflicts in Oromia and Amhara have put more strain on the spiraling economy.

 

Ethiopia's latest IMF-supported economic programme aims to boost private-sector-led growth.

 

According to the IMF, this will allow for increased spending in sectors such as health, education, investment, and social safety nets.

 

Expanding coverage and providing more assistance to the most vulnerable households was a fundamental component of the government's reform plan, it added.

 

"The IMF looks forward to supporting these efforts to help make the economy more vibrant, stable, and inclusive for all Ethiopians," Ms. Georgieva added.

 

It is also intended to "help catalyse additional external financing from development partners and provide a framework for the successful completion of the ongoing debt restructuring," according to an IMF statement.

Addis Abeba has been requesting more than $10 billion in assistance from international financial institutions such as the IMF and the World Bank.