Tuesday, May 28, 2024
NewsIMF confirms discussions underway on financial support for Ethiopia's economic reforms

IMF confirms discussions underway on financial support for Ethiopia’s economic reforms

The International Monetary Fund (IMF) has confirmed that discussions are ongoing regarding potential financial assistance to help Ethiopia address its major economic challenges.

In a virtual press briefing on September 28, 2023, IMF Communications Director Julie Kozack noted that Ethiopia has requested financial assistance from the IMF to help address several economic issues facing the country, including food insecurity, reconstruction needs after recent domestic conflicts, high inflation, and shortages of foreign currency and imports.

Kozack explained that these economic problems have been significantly exacerbated by multiple shocks in recent years, such as drought, the COVID-19 pandemic, ongoing internal conflicts, and global price increases due to the war in Ukraine.

The assistance being requested from the IMF is aimed at helping Ethiopia stabilize its economy and improve living standards for its citizens during this difficult period.

The reassurance from the IMF comes as Ethiopia awaits progress on debt restructuring negotiations delayed by the IMF’s reluctance to conduct debt verification to determine how much external debt needs restructuring given Ethiopia’s current high risk of debt distress. 

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She stated discussions are analyzing economic policies and reforms that could potentially be supported by a new IMF lending program. Kozack said this would “help Ethiopia address macroeconomic vulnerabilities and unlock its considerable economic potential.”

The Director added that any program “would support the homegrown economic reform agenda to help tackle financial weaknesses and allow Ethiopia to achieve stronger growth.”

However, Kozack stressed clear development partner commitments and creditor financing assurances under G20 debt rules would be crucial for success

The government has two major initiative that it is seeking assistance for. The reconstruction plan for northern Ethiopia requires an estimated USD 29 billion for recovery efforts in conflict-affected areas.

A separate USD 12 billion program outlines Ethiopia’s Homegrown Economic Reform Agenda over the next three years. This “homegrown reform agenda,” as Kozack described it, aims to address macroeconomic challenges and lay the foundation for stronger, more inclusive growth in the country.

Like Ethiopia, Ghana has sought IMF assistance in recent years to help address debt problems and reform its economy. In 2021, Ghana became the first sub-Saharan country to request IMF financing. The three billion dollars loan program approved in May 2023 aimed to restore stability and promote growth.

However, sizable sovereign debt posed challenges. As Kozack noted: “Ghana’s success depends on substantially restructuring what it owes creditors to more sustainable levels.”

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