World Bank, IMF Approve Additional Financing For Macroeconomic Reforms

The World Bank has approved USD one billion in support of Ethiopia’s ongoing macroeconomic reforms, according to officials at the Ministry of Finance.

The approval was announced days after the International Monetary Fund (IMF) green lit an additional USD 262 million in financing following the third review of Ethiopia’s performance under the Extended Credit Facility (ECF) program that began one year ago. It also follows reports that Ethiopia is on the verge of finalizing the terms of a drawn-out debt restructuring process.

The latest round of financing from the World Bank under the ‘Ethiopia Second Sustainable and Inclusive Growth Development Policy Operation’ consists of grants and concessional credit, according to the Ministry.

“The program aims to bolster recent government efforts to ensure financial sector stability, enhance trade competitiveness, strengthen domestic resource mobilization, promote transparent and effective governance, and ensure the sustainability of social services,” reads a statement from the Ministry.

The World Bank announced its ‘Ethiopia First Sustainable and Inclusive Growth Development Policy Operation’, which consisted of a USD one billion grant and a further USD 500 million in concessional credit from the International Development Association (IDA), when Ethiopia embarked on the IMF program in July 2024.

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Earlier this week, the IMF executive board earlier approved a USD 260 million package as part of the USD 3.4 billion approved in loans for implementation of Ethiopia’s macro-economic reform agenda implementation.

“The (Ethiopian) authorities’ policy actions in the first year of the program have yielded strong results. The transition to a flexible exchange rate regime has proceeded with little disruption,” the IMF said in a statement. “Macroeconomic indicators have performed better than expected, with substantially better outcomes than forecast for inflation, goods exports and international reserves.”

Despite the glowing review, Ethiopia’s macroeconomic reforms have faced criticism for exacerbating existing inequalities and creating new challenges. Key criticisms include rising inflation, increased cost of living, potential harm to the private sector, and concerns about the impact on vulnerable populations.

Nonetheless, the last 12 months have witnessed a series of fundamental legislative and policy shifts, including the liberalization of the foreign exchange regime and the financial sector, and opening the property market to foreign investment.