By Yared Seyoum
- The “unusual” board session comes before the IMF has announced reaching a staff-level agreement with Ethiopia.
The executive board of the International Monetary Fund is set to meet next week to formally review a new support program to Ethiopia, as the East African nation seeks fresh multilateral financing to address its economic challenges, Bloomberg reported.
The July 29 board session is “unusual,” as it comes before the IMF has announced reaching a staff-level agreement with Ethiopia on the potential support terms. Typically, such deals precede votes on new lending arrangements or reviews of existing loans.
Ethiopia's government is seeking the new IMF financing as it grapples with surging inflation, currency pressures and chronic foreign-exchange shortages. IMF staff have been negotiating with Addis Ababa for months on the potential support package.
Details of any funding amounts under discussion couldn't be confirmed. Extended credit facilities, which the Board reviewing for Ethiopia, offer medium-term loans to low-income countries facing balance-of-payments problems.
The board session comes as Ethiopia stands to receive 10.5 billion dollars in support over coming years if long-running negotiations with the IMF and World Bank bear fruit, Prime Minister Abiy Ahmed said earlier this month. Abiy told parliament the country could access 10 billion dollars from the IMF and World Bank to finance economic reforms and development programs.
Ethiopia, East Africa's most populous nation, defaulted on its debt in December, becoming the third African country in three years to do so. A decision in Ethiopia's favor on the IMF program could help stabilize its struggling economy through policy advice and financing assurances.
But analysts say Addis Ababa will need to commit to a significant devaluation of the birr currency to secure IMF funding. The birr currently trades around 90 percent weaker than its official rate on the parallel market.
Questions also remain over requirements for transparency and political reforms that the IMF may seek as conditions for any new lending arrangement with Ethiopia.