The International Monetary Fund (IMF) executive board has approved the third review of Ethiopia’s $3.4 billion loan program, releasing $262.3 million in financing.
This decision comes as the East African nation continues critical debt restructuring talks with its creditors.
The approval follows a staff-level agreement reached on May 30, which highlighted “strong results” from the first year of the program.
This initiative aims to stabilize Ethiopia’s economy amidst ongoing negotiations with both official creditors and bondholders.
Ethiopia and its Official Creditor Committee, co-chaired by France and China, recently finalized a Memorandum of Understanding on debt restructuring.
This draft agreement, initially announced in March, seeks to restructure $8.4 billion in debt and provide $2.5 billion in debt service relief through 2028, aligning with the IMF program’s duration.
This restructuring effort is part of the G20 Common Framework initiative, designed to expedite debt treatments for low-income countries.
Ethiopia has been in default on its debt since December 2023.
The IMF praised Ethiopia’s progress, stating, “The authorities have made strong progress in implementing their economic reform agenda in the first year of their Fund-supported program.
Growth has been resilient and inflation has fallen.”
Despite this progress, Ethiopia still needs to rework its $1 billion Eurobond as part of its broader restructuring.
Bondholders, however, remain at odds with the government, rejecting a principal writedown and arguing that the country faces liquidity, not solvency, issues.
The IMF has defended its debt sustainability assessment, asserting that Ethiopia must reduce its debt service obligations by $3.5 billion to achieve sustainable debt levels.