Ethiopia & IMF to Meet on Monday

Ethiopia & IMF delegations are set to meeting on Monday. The planned IMF board meeting is about new Ethiopia loan program.

IMF Executive board of directors is set to discuss Ethiopian request of a financial bailout package next week. Several sources are claiming that Ethiopia has reached a staff level agreement with the IMF, but IMF has yet to announce a staff-level agreement for new loan.

The formal meeting for an extended credit facility is set for July 29. The scheduling is unusual because the IMF still has not announced a staff-level agreement for Ethiopia, a step that typically precedes executive board votes on a new program or review of a loan.

An IMF bailout would lay out the parameters for a restructuring of Ethiopia’s debt using the Group of 20’s Common Framework mechanism.

Ethiopia has been in talks with the IMF for several months. The two have been in disagreement about currency devaluation.

Regarding the exchange rate issue, different scenarios are possible. One of them is a birr devaluation by an estimated 30-60% in one move. Ethiopian government government is still pushing for an intermediate solution, combining a partial devaluation with a so-called crawling peg exchange rate.

It seems that Ethiopian government and IMF are bundling together the size of the IMF program, the financing assurances from creditors for the forecast period and possibly some other bilateral support. In recent months, Ethiopia met several requirements for IMF program including liberalization of economy.

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IMF Wants Ethiopian Currency to be Devalued by 60%