News: Ethiopia takes step to secure crucial foreign currency from IMF, World Bank

Addis Abeba – With the conclusion of consultation on the second Home Grown Economic Reforms Agenda with the executive committee of the Development Assistance Group (DAG), Ethiopia moves a step closer to securing the much-needed foreign currency from the Bretton Woods Institutions.

In 2019, the International Monetary Fund (IMF) approved close to $3 billion to support the first phase of the Homegrown Economic Reform Program, which is designed to eliminate macroeconomic imbalances and lay the foundation for sustainable and inclusive growth. A source close to the issue informed Addis Standard, that the government is currently seeking comparable financial assistance from the IMF and the World Bank to that provided three years ago.

Chaired by Eyob Tekalign (PhD), state minister for Finance, the consultation, which kicked off at the beginning of this week, focused on the economic reforms expected to be implemented in the next three years. The reforms under discussion include a more extensive liberalization of key economic sectors, such as the financial industry.

Last week, Solomon Desta, Deputy Governor of the National Bank of Ethiopia (NBE), stated that the government intends to allow foreign insurers to operate in Ethiopia after the establishment of an independent body to regulate the sector is realized. A few months ago, the central bank made an offer to provide five banking licenses to foreign investors over the course of five years.

The conclusion of the discussion with 27 donor organizations under the DAG banner is encouraging for Ethiopia, which is currently facing a chronic shortage of foreign currency. When he presented the proposed budget for the upcoming year to members of parliament two weeks ago, Ahmed Shide, Minister of Finance, admitted that the country is enduring a major economic imbalance. According to the budget document, the amount of external assistance acquired is less than 22% of the plan, while development partners have stopped a substantial chunk of the funding they pledged during the past two years.

Following the request of the Ethiopian government, the Bretton Woods Institutions expressed their willingness to provide financial assistance subject to certain conditions. Recently, Julie Kozack, director of communications at the IMF, said that discussions are ongoing on economic policies and reforms that could potentially be supported under an IMF program.

Eyob is expected to hold further discussions about the anticipated reform interventions with the business and academic communities in the coming week. AS