IMF board approves new $3.4 bn loan program for Ethiopia

WASHINGTON

Pedestrians walk on the newly built walkways in Addis Ababa, Ethiopia, on July 27, 2024.

The IMF executive board approved a new four-year loan program for Ethiopia on Monday worth around $3.4 billion in order to help support its economic reform agenda.

Battered in recent years by several armed conflicts, the Covid pandemic, and climate shocks, the Horn of Africa country has about $28 billion of external debt and is grappling with sky-high inflation at around 20 percent and a shortage of foreign currency reserves.

Ethiopia -- Africa's second-most populous country -- has been pinning its hopes on a rescue package of at least $10.5 billion from external lenders including the International Monetary Fund, but negotiations have been long and fraught.

Monday's board approval of the loan agreement allows for the immediate disbursement of around a billion dollars, the IMF said in a statement.

"This is a landmark moment for Ethiopia," IMF Managing Director Kristalina Georgieva said, according to the statement.

The approval of the new four-year loan agreement "is a testament to Ethiopia's strong commitment to transformative reforms," she added.

Earlier Monday, Ethiopia eased foreign exchange curbs as part of its broad economic reform package, causing the value of the local currency, the birr, to slide by around 30 percent.

The IMF said it expects the new four-year loan agreement "to help catalyze additional external financing from development partners and provide a framework for the successful completion of the ongoing debt restructuring."