The International Monetary Fund (IMF) has expressed optimism that Ethiopia’s long-awaited Memorandum of Understanding (MoU) with official creditors from G20 nations will be finalized in the coming weeks.The IMF praised Ethiopia’s macroeconomic performance, highlighting that key indicators such as inflation control, export growth, and international reserves have surpassed program expectations.Ethiopia has been seeking debt restructuring under the G20 Common Framework for over four years.
Although authorities recently indicated that the process is nearing completion, the MoU has not yet been signed.Earlier this fiscal year, Ethiopia secured IMF funding under the Extended Credit Facility (ECF) after major creditors provided assurances to facilitate debt restructuring.In a statement issued on Friday, the IMF stated that an agreement on the MoU is anticipated before the IMF Executive Board reviews Ethiopia’s third program assessment.
The ECF program, valued at USD 3.4 billion, is supporting Ethiopia’s economic reforms.An IMF staff team, led by Alvaro Piris, visited Ethiopia in April to conduct the third review under the ECF program, which began in July 2024. Discussions continued during the IMF-World Bank Spring Meetings in Washington, D.C., from April 21 to 28.Pending Executive Board approval in the coming weeks, the third review would release approximately USD 260 million, bringing total IMF disbursements under the ECF to around USD 1.85 billion.
The IMF emphasized that maintaining reform efforts is crucial for consolidating economic gains, addressing macroeconomic imbalances, ensuring debt sustainability, and fostering private sector-led growth.“Ethiopia’s policy actions in the first year of the program have delivered strong results,” Piris stated.“The shift to a flexible exchange rate regime has been smooth, and reforms in monetary policy, revenue mobilization, social safety nets, and financial stability are yielding positive outcomes.”He noted that macroeconomic performance has exceeded forecasts, with notable improvements in inflation, exports, and foreign reserves.
However, the IMF pointed out ongoing challenges, including a widening gap between official and parallel exchange rates in early 2025, along with high fees and restrictions in the foreign exchange (FX) market.The IMF welcomed ongoing efforts to enhance FX market transparency, reduce costs, ease current account restrictions, and strengthen financial regulations. It also stressed the need for tight monetary policies to control inflation and stabilize exchange rate expectations.Additionally, the IMF highlighted the importance of improving the business climate, ensuring fair taxation, attracting foreign investment, and fostering dialogue with the private sector to drive sustainable economic growth.
