Authorities rejected the proposal to withdraw the allocation
Federal authorities decided to keep over half a billion dollars secured from the IMF under the Special Drawing Rights (SDR) programme as a reserve asset.
The Ministry of Finance announced that a decision has already been passed not to disburse the forex secured from the IMF in August 2021.
“Though we had the option to disburse the SDR, we decided to make it a part of our forex reserve,” State Minister of Finance, Eyob Tekalign told The Reporter.
It is a move that coincided with the expiry of USD 1.5 billion in extended credit facility that the country secured from the Fund.
Ethiopia has been facing a critical shortage of foreign currency for decades.
Though there has been an improvement since Prime Minister Abiy Ahmed (PhD) took power, thanks to the support provided by bilateral and external partners during the first year of his stay in power, it has been depleted because of the Coronavirus pandemic and the war in the northern part of the country.
Up until the end of last year, Ethiopia’s forex reserves were believed to be enough to cover two and half months of the country’s imports, which is over USD 13 billion. The SDR allocation made by the IMF has boosted the forex reserve by at least 10 percent, according to analysts.
An interest-bearing international reserve asset created half a century ago, SDR is like an artificial currency that IMF member states can exchange for hard currencies like USD, Japanese yen, Chinese yuan, the Euro and the British pound.
On August 23, 2021, a record-high 456 billion SDR (USD 650 billion) was approved by the IMF board to 190 member countries. It was the highest allocation ever made by the IMF and it has increased the total amount of SDR approved thus far to 660.7 billion SDR (equivalent to about USD 943 billion.
By keeping its SDR quota as a reserve at the Fund, authorities in Ethiopia have decided to utilize more than one billion dollars in non-concessional credit facility, which they can get from the Fund up on the conclusion of the debt works pending at the G20 countries, for rebuilding efforts after the end of the war in the northern part of the country.
“We are planning to use the undisbursed amount for the post war reconstruction,” Eyob added.