IMF to Approve $3bn Loan for Ethiopia

PM Abiy Ahmed receiving the Nobel peace prize in Oslo this week © Scanpix/AP

Financial Times

IMF Poised to Approve Landmark $3bn Loan for Ethiopia

Programme will provide balance of payments support for cash-strapped economy

The IMF is poised to approve a loan of almost $3bn for Ethiopia as part of a programme to provide balance of payments support for the cash-strapped economy as well as technical assistance for the government’s liberalisation agenda.

The loan, which still needs IMF board approval, has been agreed by staff after the fund opened a representative office in Addis Ababa this year, according to Ethiopia’s state minister of finance, Eyob Tolina.

The east African country of 105m people has enjoyed more than a decade of high growth but recently ran into capacity constraints and chronic shortages of foreign exchange, a byproduct of its tightly state-controlled economy.

Abiy Ahmed, the prime minister, took office in 2018, promising to overhaul the economy. He has spoken frequently about the limits of Ethiopia’s Asian-style state-led development model, which has produced 15 years of near double-digit growth, and he has pledged to nudge Ethiopia towards a more open, market-oriented system.

In September, Mr Abiy, who received the Nobel Peace Prize on Tuesday, announced a “homegrown economic reform” agenda, which he said would include opening various sectors to foreign investment for the first time. Two new telecoms licences are due to be auctioned next year.

Mr Tolina described the anticipated IMF programme as “a huge stamp of approval” for Mr Abiy’s agenda. “It’s excellent news,” he said. “They want to support our policy reform.”

The funds, which will be released in tranches, would be used to counter a looming balance of payments crisis and to fund specific reform initiatives, he said. He added that the IMF would also provide technical assistance on macroeconomic policy, but did not specify in which areas.

The IMF confirmed the agreement after the Financial Times published details of the loan. The fund added that the three-year $2.9bn finance package had been approved by staff following an IMF visit to Ethiopia in November. The programme would also strengthen the oversight of state-owned enterprises and support the reform of Ethiopia’s financial sector, it said in a statement.

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