IMF pins Ethiopia funding program on debt-restructuring progress
Ethiopia’s long-awaited International Monetary Fund program requires clear commitments from development partners and financing assurances from creditors on the nation’s debt-restructuring plan for funding to be approved, the Washington-based lender said.
The Horn of Africa nation is in talks with the lender about a loan of at least $2 billion. The government must initiate a new funding program to proceed with an overhaul of up to $28.2 billion of external debt under the Group of 20’s so-called Common Framework.
“An IMF program would support the Homegrown Economic Reform Agenda, help address key macroeconomic vulnerabilities, and help unlock Ethiopia’s considerable economic potential,” the fund said in an emailed response to questions. “A new program would also require clear commitments from development partners and financing assurances from creditors under the G20 Common Framework to ensure it can meet its objectives.”
Ethiopia was Africa’s fastest-growing economy until it was hit by a series of constraints including six consecutive years of drought, the Covid-19 pandemic, a civil war in its northern Tigray region that ended in November, and the impact of Russia’s war in Ukraine. The nation’s risk premium over US Treasuries has been rising since March to trade at its highest level in nearly nine months, well above the 1,000 basis points regarded as the threshold for being in debt distress.
The nation’s $1 billion of eurobonds, which mature next year, rose 0.35 cents by 12:50 p.m. in London to 68.68 cents on the dollar.
The G20 Common Framework, designed to help poor countries struggling to service their debts, requires the government of the nation seeking to benefit from a debt treatment to have an IMF‑supported program. That starts with a staff-level agreement with the fund, which then goes to the board for final approval before the financing is disbursed.
The IMF, in turn, doesn’t disburse funds without assurances from the nation’s creditors that they’re willing to negotiate a restructuring.
