The International Monetary Fund (IMF) Executive Board has completed the second review of Ethiopia's 48-month Extended Credit Facility (ECF) arrangement. This decision allows for an immediate disbursement of approximately US$248 million to assist Ethiopia in meeting its balance of payments needs. The total disbursements under this arrangement now amount to about US$1.611 billion.
Ethiopia's ECF arrangement, totaling SDR 2.556 billion or around US$3.4 billion at the time of approval on July 29, 2024, is designed to support the country's Homegrown Economic Reform Agenda (HGER). This agenda aims to address macroeconomic imbalances and establish a foundation for private sector-led growth.
All quantitative performance criteria have been met. However, the government's contribution to targeted social safety nets was lower than anticipated due to preparations needed for program expansion and absorbing increased budgetary allocations. The structural benchmark concerning the audited accounts of the National Bank of Ethiopia (NBE) has been postponed from January 2025 to March 2025.
Efforts to improve foreign exchange market functioning continue with significant policy actions taken by authorities. The NBE has maintained tight monetary conditions while advancing modernization efforts in its monetary policy framework.
Progress in raising domestic fiscal revenues and strengthening state-owned enterprises is promising, though continued commitment is necessary. Expanding social safety nets remains crucial for mitigating reform impacts on vulnerable populations.
Authorities are working towards restoring debt sustainability and securing a debt treatment agreement. Progress in debt restructuring negotiations under the Common Framework is welcomed, with financing assurances aligning with IMF policy requirements.
Nigel Clarke, Deputy Managing Director and Chairman of the Board, commented: "The authorities continue to make strong progress in implementing their Fund-supported program and addressing macroeconomic imbalances."
He further emphasized: "Continuing to restrict NBE’s FX interventions and additional policy measures will be critical to enhance market efficiency."
Clarke highlighted that reaching a positive real monetary policy rate is essential for building credibility in the new framework: "Close supervision and enforcement of net open position regulations for banks will help address financial sector vulnerabilities."
He also noted that a supplementary budget approved by parliament maintains fiscal targets aligned with program objectives: "To bring fuel prices to full cost recovery is important for mobilizing revenues."
Clarke concluded by acknowledging substantial progress towards an agreement on debt treatment with the Official Creditor Committee under the G20 Common Framework: "The authorities are working on having an agreed Memorandum of Understanding by the time of third review."