IMF Signals Progress in Talks with Ethiopia

May 18 , 2024

  The International Monetary Fund (IMF) reported "substantial progress" last week on its negotiations with Ethiopia for a potential multi-billion dollar economic support package. Julie Kozack, communications director of IMF, said that virtual meetings held after the Fund's staff visit to Ethiopia last month and subsequent Spring meetings have been productive. However, no finalised deal has been reported. Ethiopia has requested financial assistance from the IMF to address food security, humanitarian needs, post-conflict reconstruction, and high inflation. However, securing a deal with the IMF hinges on a staff-level agreement that requires Ethiopia to implement structural economic reforms. An agreement with the IMF is also crucial for Ethiopia's debt restructuring program under the Group of 20's Common Framework mechanism, which has been ongoing for the past three years. The IMF is looking for economic reforms that address current account deficits, achieve debt sustainability, improve the balance of payments, reduce inflation to single digits, and transition towards a more market-oriented exchange rate system. Despite a series of tightening monetary policy measures taken by the National Bank of Ethiopia (NBE) over the past year, inflation remains in double digits and the foreign currency shortage persists.