Ethiopia, newly awash in billions from a landmark IMF deal, is setting a sprint to the finish line for its long-delayed debt restructuring, aiming to seal the deal within six months.
The 3.4 billion dollars lifeline from the International Monetary Fund, announced Monday, has infused the Horn of Africa nation with renewed optimism and, crucially, the leverage to renegotiate its debt burden with creditors.
"Debt restructuring should be finalised before the next IMF programme review," State Minister of Finance Eyob Tekalign told Reuters, indicating the government's intent to wrap up the restructuring before the IMF's next visit – typically within three to six months.
The IMF deal, a four-year program contingent on key reforms, comes hot on the heels of Ethiopia's bold move to float its currency, the birr. The move, which sent the birr tumbling 30 percent against the dollar on Monday, was a crucial step to appease the IMF and unlock further financing.
Adding to the financial windfall, the World Bank and other creditors are poised to inject up to 7.3 billion dollars into the Ethiopian economy, officials say. The World Bank's board was scheduled to meet later Tuesday to greenlight its contribution.
The wave of positive news has already begun to ripple through the markets. Ethiopia's $1 billion sovereign bond, a linchpin in the restructuring plan, surged to its highest value since October 2021 on Tuesday, reflecting renewed investor confidence.
But while the IMF deal offers a path out of the financial wilderness, Ethiopia still faces a treacherous climb. Inflation, fueled by the devalued birr, threatens to erode purchasing power, particularly for the poorest citizens. And the scars of a two-year civil war in the Tigray region, which ended in late 2022, will take years to heal.