IMF approves USD3.4B aid program for Ethiopia amid economic reforms

(MENAFN) The International Monetary Fund's (IMF) executive board has approved a USD3.4 billion aid program for Ethiopia, following the country's decision to relax foreign exchange controls as part of a comprehensive economic reform strategy. This four-year program's approval will result in an immediate disbursement of an initial USD1 billion tranche. According to the IMF, the primary objective of this program is to support Ethiopia's efforts to address macroeconomic imbalances and establish a foundation for private sector-led growth. Kristalina Georgieva, the Managing Director of the IMF, praised Ethiopia's commitment to significant reforms, expressing the fund's satisfaction in supporting the development of a more stable and inclusive economy for all Ethiopians.

Ethiopia, Africa's second-most populous nation, is seeking a broader bailout package worth approximately USD10.5 billion from external creditors, including the IMF. However, the negotiations have been challenging and lengthy. Analysts indicate that the IMF has demanded various reforms to Ethiopia's state-controlled economy, such as floating the currency, in return for financial assistance. The country has faced significant challenges in recent years, including armed conflict, the effects of the COVID-19 pandemic, and climate-related shocks. Ethiopia's external debt stands at around USD28 billion, coupled with high inflation and a shortage of foreign exchange reserves.

Prime Minister Abiy Ahmed, who assumed office in 2018, has pledged to reform Ethiopia's closed, state-dominated economy, although progress has been slow. In a recent statement, Abiy reiterated that Ethiopia's reform agenda aims to lay the groundwork for robust private sector-led economic growth and job creation. This IMF-backed program is seen as a crucial step towards achieving these goals and stabilizing the nation's economy. 

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