ADDIS ABABA – The International Monetary Fund (IMF) has approved a $3.4 billion loan for Ethiopia to support its economic reforms over the next four years, the Fund said on Monday.
Ethiopia has been facing chronic foreign currency shortages and high inflation, issues exacerbated by a two-year civil war in Tigray that ended in 2022.
The IMF’s managing director, Kristalina Georgieva, called the agreement “a testament to Ethiopia’s strong commitment to transformative reform.”
The approval comes after Ethiopia floated its currency, a key step in securing the loan, analysts said.
The Ethiopian birr lost nearly a third of its value against the dollar following the announcement.
The IMF will immediately release about $1 billion to address Ethiopia’s balance of payments needs and support its budget. Ethiopia, Africa’s second most populous nation, has also been in talks with international creditors to restructure its debt, having defaulted on its sovereign bond in December.
Despite the end of the Tigray war, conflicts in the Oromia and Amhara regions continue to pressure the economy.
The new IMF-backed economic program aims to stimulate private-sector-led growth, enabling increased spending on health, education, investment, and social safety nets.
Expanding support to vulnerable households is a key part of the government’s reform agenda, the IMF said. Georgieva added, “
The IMF looks forward to supporting these efforts to help make the economy more vibrant, stable, and inclusive for all Ethiopians.”
The IMF expects the program to attract additional external financing from development partners and provide a framework for successful debt restructuring.
Ethiopia has been seeking over $10 billion in support from international financial institutions, including the IMF and the World Bank.
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