Ethiopia has secured a $3.4 billion loan from the International Monetary Fund (IMF), with an immediate disbursement of around $1 billion, the institution said in a July 29 statement

The financing falls under a four-year Extended Credit Facility (ECF) agreement. According to the IMF, this will help Ethiopia address macroeconomic imbalances, restore external debt sustainability, and lay the foundation for higher, inclusive, private sector-led growth.

The reforms under this program include several key measures, such as transitioning to a market-determined exchange rate, combating inflation, increasing tax revenues, and strengthening state-owned enterprises. The program also emphasizes protecting vulnerable populations and improving financial governance.

This credit facility coincides with the implementation of a market-based exchange rate system announced by the Central Bank on the same day. This reform aims to correct long-standing economic distortions, address foreign exchange shortages, improve export competitiveness, and attract foreign direct investment (FDI).

In 2021, Ethiopia requested a major debt restructuring under the G20 Common Framework, temporarily suspending bilateral debt repayments.

The country’s economy has faced numerous shocks in recent years, including the COVID-19 pandemic, a two-year conflict in the Tigray region, and extreme weather events like prolonged droughts and devastating floods.

Antoinette Sayeh, IMF Deputy Managing Director, highlighted the recent recapitalization of the Commercial Bank of Ethiopia as a crucial step in addressing a significant macro-financial vulnerability. She added that reforms to improve financial sector governance and gradually reduce financial repression would be vital for the long-term success of these economic efforts.