The ECF agreement between Ethiopia and the IMF aims to address economic imbalances, restore debt sustainability, and lay the foundation for more inclusive growth driven by the private sector.

The International Monetary Fund (IMF) board has approved an immediate disbursement of $248 million for Ethiopia after completing the second review under the Extended Credit Facility (ECF).

According to a statement on January 17, the total amount released under the agreement now stands at about $1.61 billion. The newly disbursed resources will help Ethiopia cover its balance of payments needs. The goal is to assist the country in implementing its local economic reform program (HGER), addressing economic imbalances, and laying the foundation for growth driven by the private sector.

“The authorities continue to make strong progress in implementing their Fund-supported program and addressing macroeconomic imbalances. The transition to a flexible exchange rate has advanced further, supported by macroeconomic and foreign exchange market policy measures, and the parallel market premium has stabilized in single digits with rising FX supply,” said Nigel Clarke, Deputy Managing Director and Chair of the IMF Executive Board.

The IMF emphasized that to reduce imbalances and maintain economic stability, prudent measures are necessary. This includes maintaining strict monetary policy and avoiding monetary financing of public deficits. A positive real interest rate is also crucial to enhance the credibility of the new monetary policy framework and change market expectations regarding inflation and exchange rates.

On July 29, 2024, Ethiopia signed a $3.4 billion, 48-month Extended Credit Facility agreement with the IMF. This agreement is a key step in the country's debt restructuring process, as Ethiopia's external debt stood at $28.5 billion by the end of 2023.

Ethiopia, grappling with high inflation estimated at 17.5% by the end of September 2024 and a persistent shortage of foreign exchange, became the third African country to default on its debt in December 2023, following Zambia and Ghana.