July 19, 2024

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Ethiopia IMF talks

Ethiopia Seeks Bailout Without Devaluing Birr; IMF Talks Ongoing

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Ethiopia has been in talks with the IMF for more than a year. Ethiopia wants a bailout package of more than $3 billion. The two sides have held several rounds of discussions in Ethiopia and abroad.

The official creditors of Ethiopia, including the Paris Club and countries like India and Saudi Arabia, have agreed to extend the deadline for Ethiopia to reach a preliminary deal with the IMF on a new bailout program.

This extension gives Ethiopia more time, beyond the original June 30th deadline, to negotiate the terms of an IMF support package. The creditors had previously agreed to suspend Ethiopia’s debt payments for 2023 and 2024 as part of this process.

Talks between Ethiopia and the IMF have been making progress, according to sources familiar with the negotiations. The extension prevents the creditors from potentially canceling the existing debt relief if Ethiopia misses the original cutoff date without a staff-level agreement in place.

An IMF staff team led by Mr. Alvaro Piris, IMF’s Mission Chief to Ethiopia, visited Addis Ababa from March 19 to April 2, 2024, to hold discussions on the Ethiopian request for IMF support for their reform program. Later, a senior Ethiopian delegation led by Finance Minister Ahmed Shide and National Bank Chief Mamo Mehretu visited Washington and met with IMF and World Bank officials last month. Read More…

While the IMF claims that substantial progress has been made in talks with Ethiopia, some issues are still undecided. One of the key issues is the Ethiopian currency birr’s real value. IMF wants Ethiopia to devalue its currency significantly. Ethiopia has been reluctant to devalue the birr.

Ethiopia is seeking significant debt restructuring and new financing from the IMF and other creditors to help rebuild after recent conflicts and support its economic recovery. The extended timeline provides more flexibility for these complex negotiations to conclude.

China, a major bilateral creditor to Ethiopia, has provided a separate debt standstill agreement outside of the Paris Club framework. However, China is still part of the official creditor committee overseeing the broader debt restructuring process.

Overall, the extension gives Ethiopia more time to reach a critical IMF bailout deal, which would then pave the way for a wider debt restructuring under the G20 Common Framework mechanism.